UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14 (a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
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x | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12 |
WHIRLPOOL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person (s) Filing Proxy Statement, if other than the Registrant)
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x | No fee required. |
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Notes:
Reg. (S) 240.14a-101
SEC 1913 (399)
WHIRLPOOL CORPORATION
Administrative Center
2000 North M-63
Benton Harbor, Michigan 49022-2692
To Our Stockholders:
It is my pleasure to invite you to attend the 2009 Whirlpool Corporation annual meeting of stockholders to be held on Tuesday, April 21, 2009 at 8:00 a.m., Chicago time, at 120 East Delaware Place, 8th Floor, Chicago, Illinois.
The formal notice of the meeting follows on the next page. At the meeting, stockholders will vote on the election of three directors, on five management proposals, and on two stockholder proposals, if they are properly presented at the meeting, and will transact any other business that may properly come before the meeting. In addition, we will discuss Whirlpools 2008 performance and the outlook for this year, and answer your questions.
A financial supplement containing important financial information about Whirlpool is contained in Part II of this booklet. We have also included with this booklet an annual report that includes summary financial and other important information.
We are pleased to implement the Securities and Exchange Commission rules that allow companies to furnish proxy materials to their stockholders on the Internet. We believe these rules allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our annual meeting.
Your vote is important. We urge you to please vote your shares now whether or not you plan to attend the meeting. Promptly returning your proxy will be appreciated, as it will save further mailing expense. You may revoke your proxy at any time prior to the proxy being voted by following the procedures described in Part I of this booklet.
Your vote is important and much appreciated!
JEFF M. FETTIG Chairman of the Board and Chief Executive Officer |
March 2, 2009 |
NOTICE OF 2009 ANNUAL MEETING OF STOCKHOLDERS |
The 2009 annual meeting of stockholders of WHIRLPOOL CORPORATION will be held at 120 East Delaware Place, 8th Floor, Chicago, Illinois on Tuesday, April 21, 2009, at 8:00 a.m., Chicago time, for the following purposes:
1. | to elect three persons to Whirlpools Board of Directors; |
2. | to ratify the appointment of Ernst & Young LLP as Whirlpools independent registered public accounting firm for 2009; |
3. | to approve the Whirlpool Corporation Performance Excellence Plan; |
4. | to vote on managements proposal to amend Whirlpools Restated Certificate of Incorporation to declassify our Board of Directors; |
5. | to vote on managements proposal to amend Article SIXTH of Whirlpools Restated Certificate of Incorporation to eliminate supermajority vote provisions; |
6. | to vote on managements proposal to amend Articles EIGHTH and TENTH of Whirlpools Restated Certificate of Incorporation to eliminate supermajority vote provisions; |
7. | to vote on a stockholder proposal, if properly presented at the meeting, to elect each director annually; |
8. | to vote on a stockholder proposal, if properly presented at the meeting, to eliminate supermajority stockholder vote provisions; and |
9. | to transact such other business as may properly come before the meeting. |
A list of stockholders entitled to vote at the meeting will be available for examination by any stockholder for any purpose relevant to the meeting during ordinary business hours for at least ten days prior to April 21, 2009 at Whirlpools Administrative Center, 2000 North M-63, Benton Harbor, Michigan 49022-2692.
By Order of the Board of Directors
DANIEL F. HOPP Senior Vice President, Corporate Affairs, General Counsel and Corporate Secretary |
March 2, 2009 |
TABLE OF CONTENTS |
Page | ||
1 | ||
1 | ||
Stockholder Proposals and Director Nominations for 2010 Meeting |
6 | |
6 | ||
9 | ||
16 | ||
20 | ||
22 | ||
23 | ||
24 | ||
39 | ||
40 | ||
40 | ||
42 | ||
44 | ||
47 | ||
47 | ||
50 | ||
52 | ||
58 | ||
Human Resources Committee Interlocks and Insider Participation |
59 | |
60 | ||
Matters Relating to Independent Registered Public Accounting Firm |
61 | |
62 | ||
63 | ||
Managements Proposal to Approve the Whirlpool Corporation Performance Excellence Plan (Item 3) |
64 | |
69 | ||
70 |
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73 | ||
A-1 | ||
B-1 | ||
C-1 | ||
D-1 | ||
F-1 | ||
Managements Discussion and Analysis of Financial Condition and Results of Operations |
F-2 | |
F-19 | ||
F-20 | ||
F-21 | ||
F-22 | ||
F-23 | ||
F-55 | ||
Report by Management on the Consolidated Financial Statements |
F-56 | |
Managements Report on Internal Control Over Financial Reporting |
F-57 | |
F-58 | ||
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting |
F-59 | |
F-60 |
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Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be Held on April 21, 2009:
This Proxy Statement and the Accompanying Annual Report are Available at:
www.whirlpoolcorp.com/annualreportandproxy
Among other things, this proxy statement contains information regarding: the date, time and location of the meeting, the matters being submitted to the stockholders and how to vote in person. To obtain directions to attend the annual meeting and vote in person, please contact Investor Relations at (269) 923-2641 or via e-mail at investor_relations@whirlpool.com.
INFORMATION ABOUT WHIRLPOOL CORPORATION |
Whirlpool Corporation is the worlds leading manufacturer and marketer of major home appliances. We manufacture in 12 countries and market products in nearly every country around the world under brand names such as Whirlpool, Maytag, KitchenAid, Jenn-Air, Roper, Estate, Admiral, Amana, Bauknecht, Ignis, Brastemp, Consul, and Acros. We have approximately 70,000 employees worldwide. Our headquarters are located in Benton Harbor, Michigan, and our address is 2000 North M-63, Benton Harbor, Michigan 49022-2692. Our telephone number is (269) 923-5000.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING |
Our 2009 annual meeting of stockholders will be held on Tuesday, April 21, 2009, at 8:00 a.m., Chicago time, at 120 East Delaware Place, 8th Floor, Chicago, Illinois. All stockholders as of the record date, or their duly appointed proxies, may attend the meeting. If you attend, please note that you may be asked to present valid picture identification. Please also note that if you hold your shares in street name (that is, through a broker or other nominee), you will need to bring a copy of your voting instruction card or brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting. Cameras, recording devices, cell phones, and other electronic devices will not be permitted at the meeting other than those operated by Whirlpool or its designees.
Information about this proxy statement
Why you received this proxy statement. You have received these proxy materials because our Board is soliciting your proxy to vote your shares at the annual meeting. This proxy statement includes information that we are required to provide to you under the rules of the Securities and Exchange Commission and that is designed to assist you in voting your shares. On or about March 11, 2009, we intend to mail to our stockholders of record as of the close of business on February 23, 2009, a Notice containing instructions on how to access this proxy statement and our annual report online. If you own our common stock in more than one account, such as individually and also jointly with your spouse, you may receive more than
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one Notice or set of these proxy materials. To assist us in saving money and to serve you more efficiently, we encourage you to have all your accounts registered in the same name and address by contacting our transfer agent, Computershare Trust Company, N.A., Shareholder Services, at P.O. Box 43069, Providence, Rhode Island 02940-3069; phone number: 877-453-1504; TDD/TTY for hearing impaired: 800-952-9245.
Notice of Electronic Availability of Proxy Statement and Annual Report. As permitted by Securities and Exchange Commission rules, we are making this proxy statement and our annual report available to our stockholders electronically via the Internet. On or about March 11, 2009, we intend to mail to our stockholders a Notice containing instructions on how to access this proxy statement and our annual report and vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The Notice also instructs you on how you may submit your proxy over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the Notice.
Householding. The Securities and Exchange Commissions rules permit us to deliver a single Notice or set of annual meeting materials to one address shared by two or more of our stockholders. This delivery method is referred to as householding and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one Notice or set of annual meeting materials to multiple stockholders who share an address, unless we received contrary instructions from the impacted stockholders prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of the Notice or annual meeting materials, as requested, to any stockholders at the shared address to which a single copy of those documents was delivered. If you prefer to receive separate copies of the Notice or annual meeting materials, contact Broadridge Financial Solutions, Inc. at 800-542-1061 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you are currently a stockholder sharing an address with another stockholder and wish to receive only one copy of future Notices or annual meeting materials for your household, please contact Broadridge at the above phone number or address.
Who can vote
The record date for determining stockholders entitled to vote at the annual meeting is February 23, 2009. Each of the approximately 73,556,811 shares of Whirlpool common stock issued and outstanding on that date is entitled to one vote at the annual meeting.
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Information about voting and revocation of proxies
If you received a Notice containing instructions on how to access this proxy statement electronically, you cannot vote your shares by filling out and returning the Notice. The Notice, however, provides instructions on how to vote by Internet, or by requesting and returning a paper proxy card or voting instruction card.
If your shares are held in your name, you have the right to vote in person at the meeting. If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name. As the beneficial owner, you are also invited to attend the meeting. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a legal proxy from your broker or nominee that holds your shares, giving you the right to vote the shares at the meeting.
Whether you hold shares directly as a stockholder of record or beneficially in street name, you may vote without attending the meeting. You may vote by granting a proxy or, for shares held beneficially in street name, by submitting voting instructions to your broker or nominee. In most cases, you will be able to do this by using the Internet, by telephone, or by mail if you received a printed set of the proxy materials.
By Internet - If you have Internet access, you may submit your proxy by following the instructions provided in the notice of electronic availability, or if you received a printed version of the proxy materials by mail, by following the instructions provided with your proxy materials and on your proxy card or voting instruction card.
By Telephone If you have Internet access, you may obtain instructions on voting by telephone by following the Internet access instructions provided in the notice of electronic availability. If you received printed proxy materials, your proxy card or voting instruction card will provide instructions on voting by telephone.
By Mail - If you received printed proxy materials, you may submit your proxy by mail by signing your proxy card if your shares are registered or, for shares held beneficially in street name, by following the voting instructions included by your broker, nominee or trustee, and mailing it in the enclosed envelope.
If you do not specify how you want to vote your shares on your proxy card or voting instruction card, or by voting over the Internet or telephone, we will vote them FOR the nominees named for director, FOR each of the five management proposals, and AGAINST the two stockholder proposals.
If you are a stockholder of record, you may revoke your proxy at any time before it is exercised in any of three ways: (1) by submitting written notice of revocation to Whirlpools Corporate Secretary, Daniel F. Hopp; (2) by submitting another proxy via the Internet, by telephone, or by mail that is later dated and, if by mail, that is properly signed; or (3) by voting in person at the meeting. If your shares are held in street name, you must contact your broker or nominee to revoke your proxy.
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If you participate in the Whirlpool 401(k) Retirement Plan and hold shares of Whirlpool stock in your plan account as of the record date, you will receive a request for voting instructions from the plan trustee (Vanguard) with respect to your plan shares. If you hold Whirlpool shares outside of the plan, you will vote those shares separately. You are entitled to direct Vanguard how to vote your plan shares. If you do not provide voting instructions to Vanguard by 11:59 p.m. Eastern time on April 17, 2009, the Whirlpool shares in your plan account will be voted by Vanguard in the same proportion as the shares held by Vanguard for which voting instructions have been received from other participants in the Plan. You may revoke your previously provided voting instructions by filing with Vanguard either a written notice of revocation or a properly executed proxy bearing a later date prior to the deadline for voting plan shares.
Confidentiality of votes
Whirlpools Board has adopted a policy requiring all stockholder votes to be kept permanently confidential except (1) when disclosure is required by law, (2) when a stockholder expressly consents to disclosure, or (3) when there is a contested election and the proponent filing the opposition statement does not agree to abide by this policy.
Quorum
Stockholders representing at least 50% of the common stock issued and outstanding as of the record date must be present at the annual meeting, either in person or by proxy, for there to be a quorum at the annual meeting. Abstentions and broker non-votes are counted as present for establishing a quorum. A broker non-vote occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or nominee does not have discretionary voting power and has not received instructions from the beneficial owner.
Required vote
Item 1 (Election of Directors). For more information on director elections, see Board of Directors and Corporate Governance Majority Voting for Directors; Director Resignation Policy later in this proxy statement. For the election of directors (provided the number of nominees does not exceed the number of directors to be elected), each director must receive the majority of the votes cast with respect to that director (number of shares voted for a director must exceed the number of votes cast against that director).
Item 2 (Ratification of Ernst & Young LLP), Item 3 (Performance Excellence Plan), and Items 7 and 8 (Stockholder Proposals). The affirmative vote of a majority of the outstanding common stock present in person or represented by proxy at the annual meeting and entitled to vote is required to approve the ratification of Ernst & Young (Item 2), the approval of the Performance Excellence Plan (Item 3), each of the stockholder proposals, if properly presented at the meeting (Items 7 and 8), and any other matter that may properly come before the meeting.
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Item 4 (Declassify Board of Directors) and Item 6 (Elimination of Supermajority Votes Provisions from Articles EIGHTH and TENTH). The affirmative vote of at least 80% of the voting power of Whirlpools outstanding common stock is required to approve the declassification of our Board of Directors (Item 4) and the elimination of supermajority vote provisions from Articles EIGHTH and TENTH in our Restated Certificate of Incorporation (Item 6).
Item 5 (Elimination of Supermajority Vote Provisions from Article SIXTH). The affirmative vote of a majority of the voting power of Whirlpools outstanding common stock is required to approve the elimination of supermajority vote provisions from Article SIXTH in our Restated Certificate of Incorporation (Item 5).
Abstentions and Broker non-votes
Abstentions will have no effect on the election of directors (Item 1). Abstentions will be treated as being present and entitled to vote on the other Items presented at the annual meeting and, therefore, will have the effect of votes against such proposals. If you do not provide your broker or other nominee with instructions on how to vote your street name shares, your broker or nominee will not be permitted to vote them on non-routine matters (a broker non-vote) such as Item 3. Shares subject to a broker non-vote will not be considered entitled to vote with respect to Items 3, 7, or 8, and will not affect the outcome on those proposals.
Other business
If any nominee named herein for election as a director is not available to serve, the accompanying proxy will be voted in favor of the remainder of those nominated and may be voted for a substitute person. Whirlpool expects all nominees to be available and knows of no matter to be brought before the annual meeting other than those covered in this proxy statement. If, however, any other matter properly comes before the annual meeting, we intend that the accompanying proxy will be voted thereon in accordance with the judgment of the persons voting such proxy.
Solicitation costs
Whirlpool will pay the expenses of the solicitation of proxies. We expect to pay fees of approximately $11,500 plus certain expenses for assistance by Georgeson Inc. in the solicitation of proxies. Proxies may be solicited by directors, officers, and Whirlpool employees and by Georgeson Inc. personally and by mail, telegraph, telephone, or other electronic means.
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STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2010 MEETING |
Our annual meeting of stockholders is generally held the third Tuesday in April. Assuming our 2010 annual meeting is held on that date, we must receive notice of your intention to introduce a nomination for director or other item of business at that meeting by January 20, 2010. This notice must be received by the Corporate Secretary of Whirlpool personally or by registered or certified mail and satisfy the procedures set forth in Whirlpools By-laws. In addition, any proposal that you intend to have us include in a proxy statement for the annual meeting of stockholders in 2010 must be received by us by November 11, 2009, and must otherwise comply with the Securities and Exchange Commissions rules, in order to be eligible for inclusion in the proxy statement and proxy form relating to this meeting.
ITEM 1 DIRECTORS AND NOMINEES FOR ELECTION AS DIRECTORS |
We currently have 12 directors on the Board. The directors are divided into three classes, with each class serving for a three-year period. The stockholders elect approximately one-third of the Board each year. The Board recommends a vote FOR the election of each of the directors nominated below.
Nominees for a term to expire in 2012 | ||
GARY T. DICAMILLO, 58, President and Chief Executive Officer of RADIA International (professional staffing services). Whirlpool director since 1997 and director of 3Com Corporation and The Sheridan Group, Inc. | ||
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KATHLEEN J. HEMPEL, 58, former Vice Chairman and Chief Financial Officer of Fort Howard Corporation (paper mills; retired 1997). Whirlpool director since 1994 and director of Oshkosh Corporation. | ||
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MICHAEL A. TODMAN, 51, President, Whirlpool North America. Whirlpool director since 2006 and director of Newell Rubbermaid Inc. | ||
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Directors whose terms expire in 2011 | ||
HERMAN CAIN, 63, Chief Executive Officer and President of THE New Voice, Inc. (leadership consulting). Whirlpool director since 1992 (except from December 2003 to April 2005 during a bid for political office), and director of AGCO Corporation. | ||
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JEFF M. FETTIG, 52, Chairman of the Board and Chief Executive Officer of Whirlpool. Whirlpool director since 1999 and director of The Dow Chemical Company. | ||
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MILES L. MARSH, 61, former Chairman of the Board and Chief Executive Officer of Fort James Corporation (paper mills; retired 2000). Whirlpool director since 1990. | ||
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PAUL G. STERN, 70, Partner, Arlington Capital Partners, L.L.P. and Thayer Capital Partners, L.L.P. (private investment companies), and Chairman of Claris Capital Partners (private investment banking). Whirlpool director since 1990 and director of The Dow Chemical Company. | ||
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Directors whose terms expire in 2010 | ||
MICHAEL F. JOHNSTON, 61, former Chairman of the Board and Chief Executive Officer of Visteon Corporation (motor vehicle parts and accessories; retired 2008). Whirlpool director since 2003 and director of Flowserve Corporation. | ||
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WILLIAM T. KERR, 67, Chairman of the Board of Meredith Corporation (multimedia). Whirlpool director since 2006 after serving eight years on the board of Maytag Corporation. Director of Arbitron, Inc., Interpublic Group of Companies, Inc., and The Principal Financial Group. | ||
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JANICE D. STONEY, 68, former Executive Vice President, U S WEST Communications Group, Inc. (telephone communications; retired 1992). Whirlpool director since 1987 (except for part of 1994 during a bid for political office) and director of The Williams Companies, Inc. | ||
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MICHAEL D. WHITE, 57, Chief Executive Officer of PepsiCo International and Vice Chairman, PepsiCo, Inc. (beverages and snack foods). Whirlpool director since 2004. | ||
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Director whose term expires in 2009 who is not a nominee for re-election | ||
ARNOLD G. LANGBO, 71, former Chairman of the Board and Chief Executive Officer of Kellogg Company (grain mill products; retired 2000). Whirlpool director since 1994 and director of The Hershey Company, Johnson & Johnson, and Weyerhaeuser Company. | ||
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The directors have served their respective companies indicated above in various executive or administrative positions for at least the past five years.
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE |
During 2008, our Board met seven times and had four committees. The committees consisted of an Audit Committee, a Human Resources Committee, a Corporate Governance and Nominating Committee, and a Finance Committee. Each director attended at least 75% of the total number of meetings of the Board and the Board committees on which he or she served.
All directors properly nominated for election are expected to attend the annual meeting of stockholders. At the 2008 annual meeting of stockholders, all of our directors nominated for election attended the annual meeting. In addition, all other directors also attended the 2008 annual meeting of stockholders.
The table below breaks down 2008 committee membership for each committee and each director.
Name | Audit | Human Resources |
Corporate Governance & |
Finance | ||||
Mr. Cain |
X | X | ||||||
Mr. DiCamillo |
X | Chair | ||||||
Mr. Fettig |
||||||||
Ms. Hempel |
X | X | ||||||
Mr. Johnston |
X | Chair | ||||||
Mr. Kerr |
X | X | ||||||
Mr. Langbo |
X | X | ||||||
Mr. Marsh |
X | X | ||||||
Dr. Stern |
Chair | X | ||||||
Ms. Stoney |
X | X | ||||||
Mr. Todman |
||||||||
Mr. White |
Chair | X | ||||||
2008 Meetings |
8 | 4 | 2 | 5 |
Audit Committee
The members of the Audit Committee are Mr. White (Chair), Mr. DiCamillo, Mr. Kerr, Mr. Langbo, and Mr. Marsh. Pursuant to a written charter, the Committee provides independent and objective oversight of our accounting functions and internal controls and monitors the objectivity of our financial statements. The Committee assists Board oversight of:
1. | the integrity of our financial statements; |
2. | our compliance with legal and regulatory requirements; |
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3. | the independent registered public accounting firms qualifications and independence; and |
4. | the performance of our internal audit function and independent registered public accounting firm. |
In performing these functions, the Committee is responsible for the review and discussion of the annual audited financial statements, quarterly financial statements and related reports with management, and the independent registered public accounting firm. These related reports include our disclosures under Managements Discussion and Analysis of Financial Condition and Results of Operations. The Committee also monitors the adequacy of financial disclosure, retains and/or terminates our independent registered public accounting firm and exercises sole authority to review and approve all audit engagement fees and terms. The Committee approves in advance the nature, extent, and cost of all internal control-related and permissible non-audit services provided by the independent registered public accounting firm; and reviews annual reports from the independent registered public accounting firm regarding its internal quality control procedures.
Under its charter, the Committee is comprised solely of three or more independent directors who meet the enhanced independence standards for audit committee members set forth in the New York Stock Exchange (NYSE) listing standards (which incorporates the standards set forth in the rules of the Securities and Exchange Commission). The Board has determined that each member of this Committee satisfies the financial literacy qualifications of the NYSE listing standards and that Mr. White satisfies the audit committee financial expert criteria established by the Securities and Exchange Commission and has accounting and financial management expertise as required under the NYSE listing rules.
Human Resources Committee
The members of the Human Resources Committee are Dr. Stern (Chair), Mr. Cain, Mr. Johnston, Mr. Kerr, Mr. Marsh, and Mr. White. Pursuant to a written charter, the Committee assures the adequacy of the compensation and benefits of Whirlpools officers and top management and compliance with any executive compensation disclosure requirements. In performing these functions, the Committee has sole authority and responsibility to retain and terminate any consulting firm assisting in the evaluation of CEO or senior executive compensation. The Committee has the following duties and responsibilities, among others:
1. | reviews and approves corporate goals and objectives relevant to CEO compensation, evaluates the CEOs performance in light of these goals and objectives, and sets the CEOs compensation level based on this evaluation and other relevant business information; |
2. | determines and approves the compensation and other employment arrangements for Whirlpools elected officers; |
3. | makes recommendations to the Board with respect to incentive-compensation and equity-based plans; and |
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4. | determines and approves grants for each individual participant under the stock option plans and administers the stock option plans. |
The Committee has the authority to form subcommittees and delegate to those subcommittees certain actions. Under its charter, the Committee is comprised solely of three or more independent directors who meet the independence standards under the NYSE listing standards. For information about the Committees processes for establishing and overseeing executive compensation, refer to Compensation Discussion and Analysis Role of the Human Resources Committee.
Corporate Governance and Nominating Committee
The members of the Corporate Governance and Nominating Committee are Mr. Johnston (Chair), Ms. Hempel, Dr. Stern, and Ms. Stoney. Pursuant to a written charter, the Committee provides oversight on the broad range of issues surrounding the composition and operation of the Board, including:
1. | identifying individuals qualified to become Board members; |
2. | recommending to the Board director nominees for the next annual meeting of stockholders; |
3. | recommending to the Board a set of corporate governance principles applicable to Whirlpool; and |
4. | recommending to the Board changes relating to director compensation. |
The Committee also provides recommendations to the Board in the areas of committee selection and rotation practices, evaluation of the overall effectiveness of the Board and management, and review and consideration of developments in corporate governance practices. The Committee retains the sole authority to retain and terminate any search firm to be used to identify director candidates, including sole authority to approve the search firms fees and other retention terms. To assist the Committee in identifying potential director nominees who meet the criteria and priorities established from time to time and facilitate the screening and nomination process for such nominees, the Committee has retained a third party search firm. During 2008, we engaged Heidrick & Struggles to assist the Committee in identifying and soliciting potential candidates to join our Board. On an annual basis, the Committee solicits input from the full Board and conducts a review of the effectiveness of the operation of the Board and Board Committees, including reviewing governance and operating practices and the Corporate Governance Guidelines for Operation of the Board of Directors. Under its charter, the Committee is comprised solely of three or more independent directors who meet the independence standards under the NYSE listing standards.
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Finance Committee
The members of the Finance Committee are Mr. DiCamillo (Chair), Mr. Cain, Ms. Hempel, Mr. Langbo, and Ms. Stoney. Pursuant to a written charter, the Committee considers issues impacting our financial structure and makes recommendations to the Board. The Committee develops capital policies and strategies to set an acceptable capital structure, regularly reviews dividend action, risk policy and liquidity management, adequacy of insurance coverage, the annual business plan as it relates to funds flow, capital expenditure and financing requirements, capital investment projects, major financial transactions, and tax and planning strategy and initiatives. The Committee also provides oversight of the Pension Fund Committee with respect to pension plan investment policies and plan funding requirements.
Director Independence
The Corporate Governance and Nominating Committee conducts an annual review of the independence of the members of the Board and its committees and reports its findings to the full Board. Ten of our 12 directors are nonemployee directors (all except Messrs. Fettig and Todman). Although the Board has not adopted categorical standards of materiality for independence purposes (other than those set forth in the NYSE listing standards), information provided by the directors and Whirlpool did not indicate any relationships (e.g., commercial, industrial, banking, consulting, legal, accounting, charitable, or familial), which would impair the independence of any of the nonemployee directors. Based on the report and recommendation of the Corporate Governance and Nominating Committee, the Board has determined that each of its nonemployee directors satisfies the independence standards set forth in the listing standards of the NYSE. Other than the transactions, relationships, and arrangements described in the section entitled Related Person Transactions, there was one other matter considered by the Board in determining that Whirlpools nonemployee directors are independent.
The Committees independence determinations included the review of transactions which commenced in 2004 between Whirlpool and a temporary staffing agency. The agency was selected as a supplier to Whirlpool through a competitive bid process. In 2007, the agency was acquired by a corporation which employs Mr. DiCamillo. In 2008, the contract was assumed by affiliates of the temporary staffing agency. The total amount involved in transactions between Whirlpool and the agencies was below the objective test of independence established under NYSE standards. In addition, Mr. DiCamillo confirmed that he did not participate in transactions between Whirlpool and the agencies or receive compensation based on those transactions.
Executive Sessions of Nonemployee Directors and
Communications Between Stockholders and the Board
The Board holds executive sessions of its nonemployee directors generally at each regularly scheduled meeting. The Presiding Director serves as the chairperson for these executive sessions.
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The Presiding Director is an independent director elected by the independent directors on the Board. In addition to presiding at executive sessions of nonemployee directors, the Presiding Director has the responsibility to: (1) coordinate with the Chairman and CEO in establishing the annual agenda and topic items for Board meetings; (2) retain independent advisors on behalf of the Board as the Board may determine is necessary or appropriate; (3) assist the Human Resources Committee with the annual evaluation of the Chairman and CEOs performance, and in conjunction with the Chair of the Human Resources Committee, meet with the Chairman and CEO to discuss the results of such evaluation; and (4) perform such other functions as the independent directors may designate from time to time. Mr. Marsh currently is serving as the Presiding Director.
Interested parties, including stockholders, may communicate directly with the Chairman of the Audit Committee or the nonemployee directors as a group by writing to those individuals or the group at the following address: Whirlpool Corporation, 27 North Wacker Drive, Suite 615, Chicago, Illinois 60606-2800. This address is administered by an independent maildrop business. If correspondence is received by the Corporate Secretary, it will be forwarded to the appropriate person or persons in accordance with the procedures adopted by a majority of the independent directors of the Board with a copy to the Presiding Director. When reporting a concern, please supply sufficient information so that the matter may be addressed properly. Although you are encouraged to identify yourself to assist Whirlpool in effectively addressing your concern, you may choose to remain anonymous, and Whirlpool will use its reasonable efforts to protect your identity to the extent appropriate or permitted by law.
Corporate Governance Guidelines for Operation of the Board of Directors
Whirlpool is committed to the highest standards of corporate governance. On the recommendation of the Corporate Governance and Nominating Committee, the Board adopted a set of Corporate Governance Guidelines for Operation of the Board of Directors, which, among other things, sets forth the qualifications and other criteria for director nominees. The desired personal and experience qualifications for director nominees are described in more detail below under the caption Director Nominations to be Considered by the Board.
Majority Voting for Directors; Director Resignation Policy
Whirlpools By-laws require directors to be elected by the majority of the votes cast with respect to such director in uncontested elections (number of shares voted for a director must exceed the number of votes cast against that director). In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), directors will be elected by a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. If a nominee who is serving as a director is not elected at the annual meeting, under Delaware law the director would continue to serve on the Board as a holdover director. However, under our Boards policy, any director who fails to be elected must offer to tender his or her resignation to the Board. The Board shall nominate for election or re-election as director only candidates who agree to
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tender, promptly following the annual meeting at which they are elected or re-elected as director, irrevocable resignations that will be effective upon (1) the failure to receive the required vote at the next annual meeting at which they face re-election and (2) Board acceptance of such resignation. In addition, the Board shall fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by other directors in accordance with this Board policy.
If an incumbent director fails to receive the required vote for re-election, the Corporate Governance and Nominating Committee will act on an expedited basis to determine whether to accept the directors resignation and will submit such recommendation for prompt consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding that resignation. The Corporate Governance and Nominating Committee and the Board may consider any factors they deem relevant in deciding whether to accept a directors resignation.
Code of Ethics
All of Whirlpools directors and employees, including its Chief Executive Officer, Chief Financial Officer, and other senior financial officers, are required to abide by our long-standing Code of Ethics, augmented to comply with the requirements of the NYSE and Securities and Exchange Commission, to ensure that Whirlpools business is conducted in a consistently legal and ethical manner. The Code of Ethics covers all areas of professional conduct, including employment policies, conflicts of interest, fair dealing, and the protection of confidential information, as well as strict adherence to all laws and regulations applicable to the conduct of our business. We intend to disclose future amendments to, or waivers from, certain provisions of the Code of Ethics for executive officers and directors on the Whirlpool website within four business days following the date of any such amendment or waiver.
Director Nominations to be Considered by the Board
Stockholders entitled to vote in the election of directors of the Board may nominate director candidates at times other than at the annual meeting. For a nomination to be properly made by any stockholder and be considered for recommendation by the Board to the stockholders and included in our proxy statement for the 2010 annual meeting, written notice of such stockholders nomination must be given, either by personal delivery or by registered or certified United States mail, postage prepaid, to the Corporate Secretary of Whirlpool (and must be received by the Corporate Secretary) by November 11, 2009. Such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of Whirlpool entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a statement whether such person, if elected, intends to tender, promptly following such persons election or re-election, an irrevocable resignation effective upon such persons failure to receive the required vote for re-election at the next meeting at which such person would face
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re-election and upon acceptance of such resignation by the Board in accordance with the relevant Board policy; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the then current proxy rules of the Securities and Exchange Commission, if the nominee were to be nominated by the Board; and (e) the consent of each nominee to serve as a director of Whirlpool if so elected. In order for a stockholder nomination to be included in the proxy statement, the nominee must meet the selection criteria as determined by the Corporate Governance and Nominating Committee.
The Board evaluates director nominees recommended by stockholders in the same manner in which it evaluates other director nominees. Whirlpool has established through its Corporate Governance and Nominating Committee selection criteria that identify desirable skills and experience for prospective Board members, including those properly nominated by stockholders, and address the issues of diversity and background. The Board, with the assistance of the Corporate Governance and Nominating Committee, selects potential new Board members using criteria and priorities established from time to time. Desired personal qualifications for director nominees include: intelligence, integrity, strength of character, and commitment. Nominees should also have the sense of timing required to assess and challenge the way things are done and recommend alternative solutions to problems; the independence necessary to make an unbiased evaluation of management performance and effectively carry out responsibilities of oversight; an awareness of both the business and social environment in which todays corporation operates; and a sense of urgency and spirit of cooperation that will enable them to interface with other Board members in directing the future, profitable growth of Whirlpool. Desired experience for director nominees include: at least ten years of experience in a senior executive role with a major business organization, preferably, as either Chief Executive Officer or Chairman (equivalent relevant experience from other backgrounds such as academics or government may also be considered); a proven record of accomplishment and line operating (or equivalent) experience; first-hand experience with international operations; a working knowledge of corporate governance issues and the changing role of the Board; exposure to corporate programs designed to create stockholder value, while balancing the needs of all stakeholders. Director nominees should not be employed by or affiliated with any organization that has competitive lines of business or that may otherwise present a conflict of interest. The composition, skills, and needs of the Board change over time and will be considered in establishing the profile of desirable candidates for any specific opening on the Board.
Available Information
Whirlpools current Corporate Governance Guidelines, Code of Ethics, and written charters for its Audit, Finance, Human Resources, and Corporate Governance and Nominating Committees are posted on the Whirlpool website: www.whirlpoolcorp.com scroll over the Responsibility dropdown menu, then Governance, then click on Board of Directors. Stockholders may also request a free copy of these documents from: Greg Fritz, Director, Investor Relations, Whirlpool Corporation, 2000 North M-63, Mail Drop 2800, Benton Harbor, Michigan 49022-2692; (269) 923-2641.
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NONEMPLOYEE DIRECTOR COMPENSATION |
The elements of our 2008 director compensation are reflected in the table below. Only nonemployee directors receive compensation for their services as a director. The Board has adopted an equity ownership guideline for nonemployee directors under which these directors are encouraged to own Whirlpool stock equal in value to four times the basic annual cash retainer, with a five-year timetable to obtain this objective.
Type of Compensation | Amount | |
Annual Cash Retainer |
$90,000 | |
Annual Stock Options Retainer* |
1,258 options | |
Annual Stock Awards Retainer* |
647 shares | |
Annual Retainer for Committee Chair (in addition to other retainers): |
||
Audit Committee |
$20,000 | |
All Other Committees |
$10,000 | |
Annual Retainer for Presiding Director (in addition to other retainers) |
$20,000 |
* | See Nonemployee Director Equity Plan below for explanation of how the number of options and shares were calculated for 2008. |
Nonemployee Director Equity Plan
Our Nonemployee Director Equity Plan provides for (1) a one time grant of 1,000 shares of common stock made at the time a director first joins the Board; (2) an annual grant of stock options, with the number of options to be determined by dividing $36,000 by the product of the fair market value of a single share of our common stock on the final trading day before the annual meeting of stockholders ($81.75) multiplied by 0.35; and (3) an annual grant of stock, with the number of shares to be issued to the director determined by dividing $54,000 by the average fair market value of a single share of our common stock for the final three trading days before the grant ($83.35). The exercise price under each option granted is the fair market value of the common stock on the last trading day before the annual meeting of stockholders ($81.75).
Options granted in 2008 are exercisable for the earlier of ten years after grant or five years after a nonemployee director ceases to serve on our Board, or one year in the case of the nonemployee directors death. However, no option is exercisable within the first six months of its term, unless death or disability of the director occurs. In the event that the death or disability of the director does occur and an option is exercised in the first six months of its term, any shares of common stock issued on such exercise may not be sold until the six-month anniversary of the grant date. Payment of the exercise price may be made in cash or, if permitted by law, Whirlpool common stock, valued at its market price at the time of exercise. All annual grants are made to directors on the date of our annual meeting of stockholders.
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Deferral of Annual Retainer and Stock Grants
A nonemployee director may elect to defer any portion of the annual cash retainer and annual stock awards retainer until he or she ceases to be a director. Under this policy, when the directors term ends, any deferred annual retainer will be made in a lump sum or in monthly or quarterly installments. In addition, payment of any deferred annual stock grant will be made as soon as is administratively feasible. Amounts deferred on or before December 31, 2004 accrue interest quarterly at a rate equal to the prime rate in effect from time to time. Amounts deferred after December 31, 2004 may be allocated to notional investments that mirror those available to participants in our U.S. 401(k) plan, with the exception of the Whirlpool stock fund.
Charitable Program
Through 2007, each nonemployee director, upon election or re-election to the Board, could choose to relinquish all or a portion of the annual cash retainer, in which case Whirlpool may, at its sole discretion, then make an award of up to $1 million to a charitable organization upon the directors death. Under the program, the election to relinquish compensation is irreversible, and Whirlpool may choose to make contributions in the directors name to as many as three charities. The Board of Directors acted to eliminate this program, prospectively, as of January 1, 2008. Mr. White is the only active Director with an outstanding benefit under this program.
Term Life Insurance
Whirlpool pays the premiums to provide each nonemployee director who elects to participate, with term life insurance while serving as a director, and also makes a related income tax reimbursement payment. The coverage amount is equal to one-tenth of the directors basic annual cash retainer times the directors months of service (not to exceed 120). In addition, Whirlpool provides each nonemployee director with travel accident insurance of $1 million.
Whirlpool Appliances
For evaluative purposes, Whirlpool permits nonemployee directors to test Whirlpool products for home use, and reimburses the directors for any income taxes they incur as a result of this policy. The cost to Whirlpool of this arrangement in 2008 (based on distributor price of products and delivery, installation, and service charges) did not exceed $17,500 for any one nonemployee director or $33,500 for all nonemployee directors as a group.
Business Expenses
Whirlpool reimburses nonemployee directors for business expenses related to their attendance at Whirlpool meetings, including room, meals and transportation to and from Board and committee meetings (e.g., commercial or private flights, cars and parking). On rare occasions, a directors spouse may accompany a director when traveling on Whirlpool business. Directors are also reimbursed for attendance at qualified third-party director education programs.
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Nonemployee Director Compensation Table
Name | Fees Earned or Paid in Cash(1) ($) |
Stock Awards(2) ($) |
Option Awards(3) ($) |
Non-equity Incentive Plan Compensation (4) ($) |
Change in Pension Value and Non-qualified Deferred Compensation Earnings(5) ($) |
All Other Compensation(6) ($) |
Total ($) | ||||||||
Herman Cain |
90,000 | 51,870 | 38,533 | |
|
9,601 | 190,004 | ||||||||
Gary T. DiCamillo |
100,000 | 51,870 | 38,533 | | | 6,442 | 196,845 | ||||||||
Kathleen J. Hempel |
90,000 | 51,870 | 38,533 | | | 10,780 | 191,183 | ||||||||
Michael F. Johnston |
100,000 | 51,870 | 38,533 | | | 7,021 | 197,424 | ||||||||
William T. Kerr |
90,000 | 51,870 | 38,533 | | | 10,624 | 191,027 | ||||||||
Arnold G. Langbo |
90,000 | 51,870 | 38,533 | | | 45,897 | 226,300 | ||||||||
Miles L. Marsh |
110,000 | 51,870 | 38,533 | | | 6,853 | 207,256 | ||||||||
Paul G. Stern |
100,000 | 51,870 | 38,533 | | | 2,900 | 193,303 | ||||||||
Janice D. Stoney |
90,000 | 51,870 | 38,533 | | | 12,394 | 192,797 | ||||||||
Michael D. White |
110,000* | 51,870 | 38,533 | | | 63,893 | 264,296 |
* | Of this amount, Mr. White relinquished $11,640 under the Charitable Program. |
(1) | The aggregate dollar amount of all fees earned or paid in cash for services as a director, including all annual retainer fees, before deferrals and relinquishments. |
(2) | Value of the annual grant of shares of common stock (647 in 2008). The value reflects the 2008 compensation cost recognized under Financial Accounting Standards Boards Statement No. 123(R) (revised 2004), Share-Based Payment (FAS 123R), and is equal to the grant date fair value of the stock awards. See Note 10 to the Consolidated Financial Statements contained in the Financial Supplement to this proxy statement for a discussion of the relevant assumptions used in calculating the compensation cost and grant date fair value under FAS 123R. The compensation cost and the grant date fair value of the stock awards for financial reporting purposes likely vary from the actual amount the director receives based on a number of factors, including stock price fluctuations, timing of sale and differences from valuation assumptions. As of December 31, 2008, none of our nonemployee directors were deemed to have outstanding restricted stock awards because all stock awards vest immediately. |
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(3) | Value of the annual grant of stock options (1,258 in 2008) which generally become exercisable six months after grant and expire either ten years from the award date or on the fifth anniversary of the date that the director ceases to be a director. The value reflects the 2008 compensation cost recognized under FAS 123R, and is therefore different than the amount used to calculate the number of options granted to each director under the Nonemployee Director Equity Plan. The 2008 compensation cost disclosed in this column is equal to the grant date fair value of the option awards calculated in accordance with FAS 123R because all of the stock options vested during 2008. See Note 10 to the Consolidated Financial Statements contained in the Financial Supplement to this proxy statement for a discussion of the relevant assumptions used in calculating the compensation cost and grant date fair value under FAS 123R. The compensation cost and the grant date fair value of the stock option awards for financial reporting purposes likely vary from the actual amount the director receives based on a number of factors, including stock price fluctuations, timing of exercise, and differences from valuation assumptions. As of December 31, 2008, the number of stock options held by each nonemployee director (all of which have fully vested) were: |
Herman Cain |
3,546 | |
Gary T. DiCamillo |
8,135 | |
Kathleen J. Hempel |
8,735 | |
Michael F. Johnston |
5,735 | |
William T. Kerr |
5,283 | |
Arnold G. Langbo |
8,735 | |
Miles L. Marsh |
9,935 | |
Paul G. Stern |
9,935 | |
Janice D. Stoney |
11,135 | |
Michael D. White |
5,135 |
(4) | Whirlpool does not have a non-equity incentive plan for nonemployee directors. |
(5) | Whirlpool does not have a pension plan for nonemployee directors and does not pay above-market or preferential rates on non-qualified deferred compensation for nonemployee directors. |
(6) | The table below presents an itemized account of All Other Compensation provided in 2008 to the nonemployee directors. |
Director | Tax Reimbursements(a) ($) |
Life Insurance Premiums ($) |
Charitable Program (b) ($) |
Whirlpool Appliances and ($) |
Total ($) | |||||||||
Herman Cain |
6,349 | 1,555 | | 1,697 | 9,601 | |||||||||
Gary T. DiCamillo |
4,001 | 1,555 | | 886 | 6,442 | |||||||||
Kathleen J. Hempel |
5,660 | 1,555 | | 3,565 | 10,780 | |||||||||
Michael F. Johnston |
3,915 | 741 | | 2,365 | 7,021 | |||||||||
William T. Kerr |
5,177 | 312 | | 5,135 | 10,624 | |||||||||
Arnold G. Langbo |
27,173 | 1,555 | | 17,169 | 45,897 | |||||||||
Miles L. Marsh |
5,298 | 1,555 | | | 6,853 | |||||||||
Paul G. Stern |
1,109 | | | 1,791 | 2,900 | |||||||||
Janice D. Stoney |
10,442 | 1,555 | | 397 | 12,394 | |||||||||
Michael D. White |
1,655 | 634 | 61,138 | 466 | 63,893 |
(a) | Tax reimbursements on income imputed to the director for Whirlpool appliances and other benefits received, and life insurance premiums paid on behalf of the director by Whirlpool. |
(b) | Includes 2008 interest cost and service cost related to the Charitable Program, less 2008 relinquishments. The maximum amount payable under the Charitable Program upon Mr. Whites death is $1.5 million. |
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SECURITY OWNERSHIP |
The following table presents the ownership on December 31, 2008 of the only persons known by us as of February 16, 2009 to beneficially own more than 5% of our common stock based upon statements on Schedule 13G filed by such persons with the SEC.
Schedule 13G Filed On |
Name and Address of Beneficial Owner | Shares Beneficially Owned |
Percent of Class |
||||
2/12/2009 |
PRIMECAP Management Company(1) 225 South Lake Avenue, #400 Pasadena, CA 91101 |
11,032,347 | 15.00 | % | |||
2/17/2009 |
FMR LLC(2) 82 Devonshire Street Boston, MA 02109 |
7,873,584 | 10.71 | % | |||
2/13/2009 |
Vanguard Chester Funds Vanguard Primecap Fund(3) 100 Vanguard Blvd. Malvern, PA 19355 |
5,945,000 | 8.08 | % | |||
2/17/2009 |
Pzena Investment Management, LLC(4) 120 West 45th Street, 20th Floor New York, NY 10036 |
4,553,081 | 6.19 | % | |||
2/10/2009 |
T. Rowe Price Associates, Inc.(5) 100 E. Pratt Street Baltimore, MD 21202 |
3,865,139 | 5.26 | % | |||
2/13/2009 |
The Vanguard Group Inc.(6) 100 Vanguard Blvd. Malvern, PA 19355 |
3,751,006 | 5.10 | % |
(1) | Based solely on a Schedule 13G/A filed with the SEC by PRIMECAP Management Company, a registered investment advisor. PRIMECAP has sole voting power with respect to 2,580,647 shares and sole dispositive power with respect to 11,032,347 shares. |
(2) | Based solely on a Schedule 13G/A filed with the SEC by FMR LLC (FMR) and Edward C. Johnson, all such shares are beneficially owned by five entities: (a) Fidelity Management & Research Company (Fidelity), a registered investment advisor to various investment companies (Fidelity Funds) and a wholly-owned subsidiary of FMR, (b) Strategic Advisers, Inc. (SA), a wholly-owned subsidiary of FMR and a registered investment advisor, (c) Pyramis Global Advisors, LLC (PGALLC), an indirect wholly-owned subsidiary of FMR and a registered investment advisor, (d) Pyramis Global Advisors Trust Company (PGATC), an indirect wholly-owned subsidiary of FMR and a bank, and (e) FIL Limited (FIL), a qualified institution that is separate from FMR but predominately controlled by Mr. Johnson and his family. Fidelity is the beneficial owner of 7,537,861 shares. Mr. Johnson (Chairman of FMR), FMR (through its control of Fidelity) and Fidelity Funds each has sole dispositive power with respect to 7,537,861 shares. Neither Mr. Johnson nor FMR has the sole power to vote or direct the voting of the shares owned directly by Fidelity Funds. The sole voting power of all shares directly owned by Fidelity Funds resides with the Board of Trustees of such funds. SA is the beneficial owner of 33 shares. PGALLC is the beneficial owner of 247 shares. Mr. Johnson and FMR (through its control of PGALLC) each has sole dispositive and voting power with respect to 247 shares. PGATC is the beneficial owner of 187,013 shares. Mr. Johnson and FMR (through its control of PGATC) each has sole dispositive power over 187,013 shares and sole voting power with respect to 174,503 shares. |
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(3) | Based solely on a Schedule 13G/A filed with the SEC by Vanguard Chester Funds Vanguard Primecap Fund (Vanguard), a registered investment advisor. Vanguard has sole voting power with respect to all shares. |
(4) | Based solely on a Schedule 13G/A filed with the SEC by Pzena Investment Management, LLC, a registered investment advisor. Pzena has sole voting power with respect to 3,929,972 shares and sole dispositive power with respect to 4,553,081 shares. |
(5) | Based solely on a Schedule 13G filed with the SEC by T. Rowe Price Associates, Inc., a registered investment advisor. T. Rowe Price has sole voting power with respect to 903,363 shares and sole dispositive power with respect to 3,865,139 shares. |
(6) | Based solely on a Schedule 13G/A filed with the SEC by The Vanguard Group Inc., (Vanguard), a registered investment advisor. Vanguard has sole voting power with respect to 86,988 shares and sole dispositive power with respect to 3,751,006 shares. Vanguard Fiduciary Trust Company (VFTC), a wholly-owned subsidiary of Vanguard, is the beneficial owner with sole voting power of 86,988 shares as a result of its serving as investment manager of collective trust accounts. |
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BENEFICIAL OWNERSHIP |
The following table reports beneficial ownership of common stock by each director, nominee for director, the Chief Executive Officer, Chief Financial Officer, and the three other most highly compensated executive officers, and all directors and executive officers of Whirlpool as a group, as of February 23, 2009. Beneficial ownership includes, unless otherwise indicated, all shares with respect to which each director or executive officer, directly or indirectly, has or shares the power to vote or to direct the voting of such shares or to dispose or direct the disposition of such shares. The address of all directors and executive officers named below is c/o Whirlpool Corporation, 2000 North M-63, Benton Harbor, Michigan 49022-2692.
Shares Beneficially Owned(1) |
Deferred Stock Units(2) |
Shares Under Exercisable Options(3) |
Total(4) | Percentage | |||||||
Marc R. Bitzer |
31,363 | 9,768 | 20,536 | 61,667 | * | ||||||
Herman Cain |
9,985 | 0 | 3,546 | 13,531 | * | ||||||
Gary T. DiCamillo |
5,563 | 6,018 | 8,135 | 19,716 | * | ||||||
Jeff M. Fettig |
140,606 | 167,700 | 548,905 | 857,211 | 1.15 | % | |||||
Kathleen J. Hempel |
8,475 | 4,172 | 8,735 | 21,382 | * | ||||||
Michael F. Johnston |
3,000 | 3,271 | 5,735 | 12,006 | * | ||||||
William T. Kerr |
3,268 | 0 | 5,283 | 8,551 | * | ||||||
Arnold G. Langbo |
8,782 | 5,109 | 8,735 | 22,626 | * | ||||||
Miles L. Marsh |
11,645 | 5,655 | 9,935 | 27,235 | * | ||||||
Paulo F. M. Periquito |
169,364 | 51,548 | 71,255 | 292,167 | * | ||||||
Paul G. Stern |
10,075 | 6,807 | 9,935 | 26,817 | * | ||||||
Janice D. Stoney |
7,948 | 8,214 | 11,135 | 27,297 | * | ||||||
Roy W. Templin |
18,535 | 2,165 | 33,791 | 54,491 | * | ||||||
Michael A. Todman |
38,384 | 30,195 | 79,653 | 148,232 | * | ||||||
Michael D. White |
2,700 | 2,825 | 5,135 | 10,660 | * | ||||||
All directors and executive officers as a group (18 persons) |
484,780 | 303,447 | 837,762 | 1,625,989 | 2.18 | % |
* | Less than 1%. |
(1) | Does not include 2,189,726 shares held by the Whirlpool 401(k) Trust (but does include 3,385 shares held for the accounts of executive officers); Executive Vice President and Chief Financial Officer Roy W. Templin serves as one of four individual trustees with shared voting and investment powers. |
(2) | Represents the number of shares of common stock, based on deferrals made into the Deferred Compensation Plan II for Nonemployee Directors, one of the executive deferred savings plans, or the terms of deferred stock awards, that we are required to pay to a nonemployee director when the director leaves the Board or to an executive officer when the executive officer is no longer an employee. None of these deferred stock units have voting rights. |
(3) | Includes shares subject to options that will become exercisable within 60 days of February 23, 2009. |
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(4) | No shares of Whirlpool stock have been pledged as security by any of these individuals, except that Mr. Langbo pledged 7,982 shares, and Mr. Todman pledged 30,325 shares, in connection with transactions with third parties. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
Section 16(a) of the Securities Exchange Act of 1934 requires Whirlpools directors and executive officers and persons who own more than 10% of Whirlpools common stock (each a reporting person) to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Whirlpools common stock. Based solely on its review of the copies of such reports furnished to or prepared by Whirlpool and written representations that no other reports were required, Whirlpool believes that all Section 16(a) filing requirements applicable to reporting persons were complied with during the fiscal year ended December 31, 2008.
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COMPENSATION DISCUSSION AND ANALYSIS |
2008 Summary
| Compensation awarded to our Named Executive Officers (NEOs) is comprised of base salary, annual short term incentives, and long-term incentives, with over 75% of total compensation each year being at-risk. |
| 2008 reflected our ongoing commitment to a pay-for-performance philosophy, where executive compensation is linked to both individual and company performance. |
| In 2008, we experienced extraordinary macroeconomic challenges, which had a significant, negative impact on our revenues and earnings from operations. |
| Annual short-term cash incentive goals proved to be extremely challenging with year-end award determinations resulting in significantly reduced award levels for all NEOs compared to 2007. |
| Long-term incentive goals also proved to be extremely challenging with year-end award determinations resulting in a payout of only 25% of target awards. |
| Substantial reductions in NEO total compensation for 2008, a year when core business objectives were not achieved, demonstrates that our program design responds to our business results. |
| Equity-based awards will continue to play an important role in this difficult economic environment because they reward NEOs for the achievement of long-term business objectives and provide incentives for the creation of stockholder value. |
The Objectives of Whirlpools Compensation Program
We are dedicated to global leadership and to delivering superior stockholder value. Our executive compensation philosophy supports these objectives by attracting and retaining the best management talent and by motivating these employees to achieve business and financial goals that create value for stockholders in a manner consistent with Whirlpools focus on five enduring values: respect, integrity, diversity and inclusion, teamwork, and the spirit of winning.
To achieve our objectives, we implement a pay-for-performance philosophy using the following guiding principles:
| compensation should be incentive-driven with both a short and long-term focus; |
| a significant portion of pay should be variable, or at risk; |
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| components of compensation should be tied to increasing stockholder value; and, |
| compensation should be tied to a balanced evaluation of business and individual performance measured against financial, customer, and employee related objectives a balanced scorecard approach. |
The Human Resources Committee of the Board of Directors (the Committee) sets compensation using a market-based approach, with differentiation based on individual and company performance. The elements of our compensation program reflect our pay-for-performance philosophy. The Committee creates a compensation package for each NEO that contains a mix of compensation elements that it believes best addresses the NEOs responsibilities and that will best achieve our overall compensation objectives. In establishing target compensation, the Committee considers factors discussed below such as market value and job responsibility. The Committee does not use a specific formula for allocating between fixed and variable components of pay or between long-term incentive vehicles.
Generally, the proportion of equity compensation rises with increasing job responsibility. Taken as a whole, our compensation program is designed so that the individuals target compensation level rises as job responsibility increases, with the portion of performance-based, or at risk compensation rising as a percentage of total target compensation. As a result, actual total compensation of an executive as a multiple of the total compensation of his or her subordinates is designed to increase in periods of above-target performance and decrease in times of below target performance. In addition, the Committee makes distinctions in the mix of cash and equity components based on job responsibility in shaping each executive officers compensation package. The Committee believes that by balancing cash and equity awards, and short and long-term incentives, we ensure that our compensation program does not encourage executive officers to take unreasonable risks.
Compensation Elements
Element | Characteristics | |
Base Salary |
Fixed component based on responsibility, experience and performance
Target is the median level for similar positions in the comparator group | |
Short-term Incentives |
Variable cash incentives based on annual performance
Target is the median level of total cash compensation for similar positions in the comparator group |
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Element | Characteristics | |
Long-term Incentives |
Performance-based variable equity and cash incentives through grants of stock options and performance-based restricted stock units (payable in stock) and performance cash units
Target is the median level of total pay for similar positions in the comparator group | |
Other Benefits |
Health and welfare benefits available to substantially all salaried employees
Limited perquisites designed to support a market-competitive compensation package | |
Retirement Benefits |
U.S. based NEOs participate in qualified and non-qualified defined benefit and defined contribution plans
Target is the median income replacement ratio for a broad-based group of companies
NEOs outside the U.S. participate in retirement plans designed to be competitive within their regions |
Compensation Process and Methodology
Role of the Human Resources Committee
The Committee has overall responsibility for Whirlpools executive compensation programs. Typically, the Committee adopts the compensation goals and objectives for awards under our short-term and long-term incentive plans at its meeting in February of each year. The Committee considers and makes decisions on the principle elements of each executive officers compensation package at its February meeting. The Committee also performs its evaluation of CEO performance and establishes CEO compensation at this meeting. Throughout the year, the Committee evaluates the overall effectiveness of our compensation philosophy and programs. In addition, the Committee reviews managements recommendations regarding hiring, promotion, retention, severance and individual executive compensation packages related to those events.
In making its determinations, the Committee reviews and considers various factors and assigns different weightings to these factors depending on the type of determination and the circumstances related to each specific action. For example, in determining base salary, the Committee may rely more heavily on market data and the recommendation of its independent
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compensation advisor. In determining the payout of incentive awards, the Committees consideration of company performance and managements assessment of individual performance may predominate. In setting long-term compensation, the Committee may give more weight to the complexity of the individuals position and impact on overall company results. While the Committee solicits and reviews recommendations from its independent compensation advisor, and in some circumstances, management, ultimately the Committee makes decisions regarding these matters in the exercise of its sole discretion.
Benchmarking and the Role of Consultants
The Committee establishes target compensation levels using a market-based approach. Each year, the Committee engages an independent compensation advisor to advise the Committee on Whirlpools executive compensation program. In 2008, the Committee retained Hewitt Associates, an outside human resources consulting firm, as its independent executive compensation advisor to provide data and analysis regarding pay levels for our NEOs and other senior executives. Specifically, the Committee requested that Hewitt Associates assist the Committee in (1) reviewing the group of companies against whom Whirlpools senior executive pay levels are compared (our comparator group); (2) reviewing executive compensation market practices and trends in general; (3) designing and recommending the compensation packages provided to the NEOs and other senior executives; and (4) providing a marketplace assessment of the compensation for the NEOs and other senior executives in comparison to the compensation for comparable positions within the comparator group. With respect to the CEO, Hewitt Associates provided a recommendation, without the CEOs input, to the Committee regarding the CEOs compensation package (target and mix of pay components). The Committee used Hewitts recommendation as the primary basis for the Committees final decision on the CEOs compensation package. After taking into account input from the CEO, Hewitt Associates also provided a recommendation to the Committee for the other NEOs and senior executives.
Other than the work it performs for the Committee, Hewitt Associates provides minimal compensation consulting services to Whirlpool such as providing market data for non-senior management compensation and actuarial services to Whirlpools European and Asian regions. Hewitt Associates has been the Committees compensation advisor since 2003 and was most recently reappointed in 2006.
The Committee periodically reviews other compensation consultants and the Committee Chair met with several consultants in the fourth quarter of 2008. Effective in 2009, the Committee has engaged Frederic W. Cook & Co., Inc. to provide executive compensation consulting services. Frederic W. Cook & Co., Inc. does not provide any consulting services to Whirlpool and works exclusively with the Committee as an independent consultant.
For 2008, the Committee retained the comparator group listed below which was used to benchmark executive compensation in prior years. These companies were selected because they have national and international business operations and are similar to Whirlpool in sales volumes, market capitalizations, employment levels, lines of business, and organizational
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structure. Companies in the comparator group are recognized for their excellence in the areas of consumer focus and trade partner relations, and for possessing highly complex global supply chains and manufacturing footprints.
3M Company |
Honeywell International Inc. | |
The Black & Decker Corporation |
Illinois Tool Works, Inc. | |
Caterpillar Inc. |
Ingersoll-Rand Company Ltd. | |
Cummins Inc. |
Kellogg Company | |
Colgate-Palmolive Company |
Motorola, Inc. | |
Deere & Company |
PPG Industries, Inc. | |
Eastman Kodak Company |
Raytheon Company | |
Eaton Corporation |
Sara Lee Corporation | |
Emerson Electric Co. |
Textron, Inc. | |
The Goodyear Tire & Rubber Company |
United Technologies Corp. | |
H. J. Heinz Company |
Xerox Corporation |
We use publicly disclosed compensation data contained in proxy statements, as well as proprietary surveys purchased from third-party consulting firms to acquire market compensation data for companies in the comparator group.
Role of Management
Each year, our management, led by the CEO and Chief Human Resources Officer, makes recommendations to the Committee regarding the compensation and benefit programs for all executive officers. In addition, the CEO makes recommendations with respect to base salary, annual cash incentives, equity compensation, and the total compensation levels for executive officers other than himself based on his assessment of personal performance and contribution to Whirlpool. Management recommends the performance metrics to be used in establishing performance goals for the annual cash incentive and long-term equity and cash incentive programs for adoption by the Committee. The Committee has authority to adopt or modify these metrics in its sole discretion. In addition, management may assess individual performance to assist the Committee in making determinations regarding awards to be paid out under incentive programs.
Base Salary
In February 2008, the Committee reviewed salary increase guidelines for each NEO. In the case of NEOs other than the CEO, the guidelines are established based on the CEOs assessment of individual performance, as well as competitive market reviews provided by Hewitt Associates. In the case of the CEO, the salary increase guidelines were based on Hewitt Associates data and the Committees assessment of the CEOs performance.
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Based on this review, the Committee made annual salary increases effective March 1, 2008 as follows: Mr. Fettigs salary was increased from $1,200,000 to $1,275,000; Mr. Templins salary was increased from $600,000 to $650,000; Mr. Todmans salary was increased from $720,000 to $760,000; Mr. Periquitos salary was increased from $700,000 to $735,000; and Mr. Bitzers salary was increased from 460,000 to 490,000 (approximately U.S. $676,000 to $720,000 as of March 1, 2008).
Consistent with the CEOs recommendations, the Committee authorized no salary increases for Messrs. Fettig, Templin, Todman and Periquito in 2009, due to the challenging economic environment in which we are operating. In December 2008, Mr. Bitzer was promoted to President, U.S. Operations, but did not receive a salary increase at that time. The Committee approved a salary of $650,000 for Mr. Bitzer, effective March 1, 2009, which is approximately equivalent to his current salary expressed in Euros, based on February 2009 conversion rates.
Short-Term Incentives
Consistent with Whirlpools pay-for-performance philosophy, all salaried employees, including each NEO, are eligible to participate in the stockholder-approved Performance Excellence Plan (PEP), our annual cash incentive program. A new PEP is being submitted for stockholder approval at our 2009 annual meeting of stockholders as described under Item 3 Approval of Whirlpool Corporation Performance Excellence Plan. PEP is designed to focus attention on stockholder value creation, drive performance in support of this goal and other business goals, and reflect individual performance as measured against financial, customer, and employee-related objectives. The Committee establishes target incentive levels for NEOs as a percentage of their base salary as of the start of the performance period.
PEP ensures that a significant proportion of pay for our NEOs is at risk and variable. For 2008, the Committee established PEP targets, expressed as percentages of base salary, for the NEOs as follows: Mr. Fettig at 140%; Mr. Templin at 85%; Mr. Todman at 100%; Mr. Periquito at 100%; and Mr. Bitzer at 80%. These amounts become the Target Awards.
As discussed below under the caption Deductibility of Compensation and Related Issues, awards under PEP qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code). To preserve maximum tax deductibility and allow the Committee the latitude to address unforeseeable and uncontrollable events and conditions, and to facilitate the Committees ability to assess and reward individual performance under the Whirlpool performance assessment system, the Committee established a return on equity (ROE) target for executive officers at a level that would allow the Committee to take into consideration the impact of such events or conditions in adjusting payouts downward. The Committee set maximum possible payouts with respect to achievement of the ROE target under PEP at four times the Target Award. Under the terms of PEP, no award for 2008 could exceed $3 million. The ROE target was tied to our projected operating plan and, therefore, its achievement was substantially uncertain when it was set in February 2008.
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In reviewing performance under PEP for 2008, at its February 2009 meeting, the Committee determined that the ROE target established for 2008 was met. For each NEO, the Committee adjusted the possible payout of four times the target award downward based on a Company Performance Factor and an Individual Performance Factor as illustrated below:
Illustration of Whirlpools Annual Short-Term Incentive Award:
In addition to setting Target Awards in 2008, the Committee established equally weighted Company Performance and Individual Performance Factors for each executive officer. In defining the Company Performance Factor for 2008, the Committee determined that company performance in-line with expected performance would result in a Performance Factor of 100%. Company performance substantially above expected performance could result in a payout up to 200% of the targeted incentive level, and performance below expected performance could result in a Performance Factor of 0% with no award being paid out under PEP.
The company performance measures adopted by the Committee for purposes of determining awards under PEP for 2008 are contained in the following Global Balanced Scorecard:
| Financial measures revenue growth, earnings, earnings per share, free cash flow, and economic value added; |
| Customer measures market share, quality, and brand equity progress; and, |
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| Employee measures the strengthening of our talent pipeline, diversity, engagement of our employees, and the effective utilization of the Whirlpool performance management system. |
With respect to the Global Balanced Scorecard, the Committee determined that overall performance on Customer measures and Employee measures met expectations. The Committee reviewed global financial measures including earnings from continuing operations of $5.50 per share, down 32% from the prior year. The Committee noted substantial declines in North American operating results and a broadening weakness in our international operations, concluding that performance on Financial Measures failed to meet expectations. Based on these performance results, the Committee assigned a Global Balanced Scorecard multiplier of 25%. Because Messrs. Fettig, Templin and Todman have global responsibilities, the Global Balanced Scorecard multiplier equated to a 25% Company Performance Factor.
For each NEO with specific regional responsibilities (Mr. Bitzer Europe, and Mr. Periquito International), the Global Balanced Scorecard factor is added to the factor assigned to a regions performance and divided by two to determine the Company Performance Factor. The Committee considered a slight increase in revenues, 4.4%, but low earnings, $149 million, in Europe in assigning a performance factor of 25% for the European region. As a result, Mr. Bitzers Company Performance Factor was also 25%. Strong business performance in areas outside the U.S., $637 million in operating profit and a 6% revenue increase resulted in an international performance factor of 135% and a Company Performance Factor of 80% for Mr. Periquito.
The Committee also annually evaluates each executive officers individual performance measure based on a rigorous review of individual achievements during the performance period relative to established goals. As a result of this process, each NEO receives one of the following performance ratings:
Individual Performance Rating |
General Description |
Individual Performance Factor (Individual Multiplier) | ||
1 | Extraordinary Results | 200% of target amount | ||
2 | Very Strong Results | 150% of target amount | ||
3 | Strong Results | 100% of target amount | ||
4 | Results Need to Be Improved | 50% to 75% of target amount | ||
5 | Unacceptable Results | 0% No award given |
In determining the individual performance rating, the Committee considers each NEOs absolute performance, performance relative to internal peers, any unforeseen factors that influenced the results of each NEO, and the extent to which the leadership of each NEO has contributed to Whirlpools success during the performance period based on qualitative measures. With respect to NEOs other than the CEO, the Committee may rely on the assessment of individual performance provided by the CEO. For 2008, each NEO received a performance rating of Level 3 or higher.
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Based on this review, the Committee determined the actual PEP payout to each NEO by multiplying the NEOs Target Award by the applicable Company Performance Factor and Individual Performance Factor. The Committee exercised negative discretion to adjust each NEOs possible payout downward accordingly. The resulting awards for Mr. Fettig and Mr. Todman were each 83% lower than their PEP awards for 2007. Mr. Templins PEP award was 73% lower than his 2007 award. The resulting awards for Mr. Periquito and Mr. Bitzer were 52% and 82% lower, respectively, than their PEP awards for 2007.
Long-Term Incentives
Long-term incentive opportunities are tied directly to Whirlpools financial and strategic performance over a preset period beginning each January 1 and continuing for one year or longer. Each set of performance measures is unique and rewards the achievement of specific long-term strategic goals designed to deliver long-term shareholder value. The length of the performance period varies from year to year depending on the performance measures established by the Committee.
Long-term awards consist of a combination of stock options and stock equivalents in the forms of performance-based restricted stock units, which are distributed in stock, and performance units payable in cash, depending on the NEOs job responsibilities. From time to time, the Committee has approved awards of stock units with certain time-based vesting requirements for selected executives based on special recognition and retention circumstances. The Whirlpool Corporation 2007 Omnibus Stock and Incentive Plan, which was approved by the stockholders at the 2007 annual meeting, also provides for the issuance of other types of equity-based awards, including stock awards and stock appreciation rights.
Establishing Award Levels and Equity Values
The Committee typically makes long-term awards to executive officers annually and establishes performance measures at its February meeting. As discussed above, consistent with our annual incentive plan, PEP, the Committee establishes an ROE target for purposes of ensuring that stock equivalent awards qualify as performance-based compensation under Section 162(m).
The Committee establishes market-based target incentive levels for each executive officer expressed as a percentage of base salary. For 2008 long-term incentives, the Committee determined the following long-term incentive targets for NEOs: for Mr. Fettig, 575%; for Mr. Templin, 200%; for Mr. Todman, 250%; for Mr. Periquito, 225%; and for Mr. Bitzer, 150%.
For 2008, the Committee granted NEOs long-term awards consisting of a combination of stock options, performance-based restricted stock units and performance cash units under the shareholder approved 2007 Omnibus Stock and Incentive Plan. The Committee determined the allocation of each executive officers award based on the officers position and ability to impact stock value.
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The Committee determined that for Messrs. Fettig and Todman the 2008 long-term incentive award amounts would be equally weighted at 1/2 in stock options and 1/2 in performance-based restricted stock units. The Committee believes that awards of stock options and performance-based stock units, which if earned are distributed in the form of common stock, reinforce the objectives of making these incentives at risk and directly tied to increasing stockholder value. Consistent with awards approved for other senior officers, the 2008 long-term incentive award amounts for Messrs. Templin, Periquito and Bitzer were equally weighted at 1/3 performance-based restricted stock units, 1/3 stock options, and 1/3 performance cash units.
Because the value of stock options is inherently linked to Whirlpools stock performance, the number of stock options to be awarded is not determined over the course of a performance period. The Committee granted stock options to the NEOs in February 2008, determining the number of stock options to be awarded based on a target value on the date of the grant. The fair market value of stock options has been set at 35% of face value, using an option valuation methodology. The option strike price is $88.49 per share, the closing price of Whirlpool stock on the New York Stock Exchange on the date of the grant, but significantly above the current trading price of Whirlpool stock. Stock options vest over a three year term and are exercisable over a ten year period, promoting a focus on long-term stock value, as well as executive retention.
The Committee determined the number of performance-based restricted stock units and performance cash units to be awarded based on the achievement of performance goals for 2008. For 2008, the Committee selected a one-year performance period for the achievement of performance goals, with the number of performance-based restricted stock units and performance-based cash units to be awarded determined in 2009. The Committee established the target number for each NEO based on the closing price of Whirlpool stock on the date the target was established in February 2008. Because the Committee determines the number of stock options to be granted and the target number of stock equivalents based on the then current fair market value, these numbers may vary significantly from year to year as a result of changes in the stock price.
Establishing Performance Measures and Reviewing Outcomes
As discussed above with respect to PEP, for 2008, the Committee established an ROE target for purposes of ensuring that the performance-based restricted stock units and performance-based cash unit awards qualified as performance-based compensation under Section 162(m). The Committee determined that the maximum award available for achievement of the ROE goal would be 200% of the target number of stock equivalents. As with PEP, the Committee determined that the ROE target was met for 2008. The Committee then applied negative discretion to adjust the maximum award downward.
For 2008, the Committee established an objective of expanding external operating profit through the full deployment and delivery of operational capability, as the performance measure to determine the number of performance-based stock units and performance cash
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units. The Committee provided for the achievement of the objective to be measured under a Transformational Scorecard consisting of innovation, total cost productivity, price margin realization, total cost of quality, and the ratio of operating profit to earnings from continuing operations. The Committee designated a performance period of one year.
For 2008, the Committee determined that performance in-line with expectations would result in a payout equal to 100% of the target number of performance-based stock units and performance cash units, while performance substantially above expected performance could result in a payout equal to 200% of the target. Performance below expected performance could result in no pay out.
In assessing the Transformational Scorecard results for 2008, the Committee concluded that only the external operating profit/net earnings ratio objective was achieved. The Committee determined that in view of this performance outcome, only 25% of the target number of stock units and cash units would be awarded to the NEOs. As discussed above, the Committee set the target number of units based on the fair market value of Whirlpool stock in February 2008 and did not adjust the target number due to subsequent declines in market value. The performance-based stock units and performance cash units are subject to a two-year vesting period and will be distributed in February 2011. By combining the features of a performance period and a vesting period, these awards reward contributions to long-term objectives and discourage taking excessive risks for short-term gain.
Timing of Equity Awards
We have generally followed a practice of making all equity-based grants to employees, including NEOs, on a single date every year. The Committee grants these equity-based awards at its regularly scheduled meeting in mid-February. This meeting usually occurs after we release our final earnings for the prior fiscal year, which permits material information regarding our performance for the prior fiscal year to be disclosed to the public before equity-based grants are made. While most of our equity-based awards have historically been made pursuant to our annual grant program, the Committee retains the discretion to make additional off-cycle awards in connection with promotions, recruitment efforts, or significant accomplishments. Under the 2007 Omnibus Stock and Incentive Plan, stock option exercise prices are set equal to the fair market value of Whirlpool stock which is the officially quoted closing price of our common stock on the date of grant.
Perquisites
We provide limited perquisites to executives, including financial planning services, limited use of Whirlpool owned and leased property, product discounts, home security, and medical physicals. These perquisites are designed to support a market competitive total compensation package and ensure that Whirlpool derives the most value from our overall compensation expenditure. For purposes of personal security, Mr. Fettig and Mr. Todman may use company aircraft for personal use. Mr. Periquito is eligible to receive the use of a company car as part of a competitive total compensation package, consistent with prevailing
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practice in Latin America. Mr. Periquito receives an annual allowance of $100,000 to recognize increased living costs outside the United States. As an expatriate in Italy in 2008, Mr. Bitzer was eligible for payments to defray the cost of his childrens education.
Post-termination Payments
Our U.S.-based NEOs are eligible to receive benefits under a severance policy generally available to U.S. salaried employees. Under Italian law, Mr. Bitzer was entitled to a lump sum severance benefit equal to one year of salary, plus the average of his last three awards received through participation in PEP, plus an accrued lump sum statutory severance indemnity payment equal to 70,955 (approximately U.S. $104,000). As a U.S.-based employee in 2009, Mr. Bitzer will no longer be eligible for this benefit. Mr. Periquito is entitled to an amount equal to 13.82 months of base salary under the terms of his employment agreement. In addition, the Human Resources Committee may agree to provide additional severance benefits upon the termination of an executive officer.
We have entered into Compensation Benefits and Assurance Agreements with each executive officer, including each NEO, to provide benefits in the event of a qualifying termination following a change in control of Whirlpool. We maintain this program to ensure that our NEOs are not deterred from exploring opportunities that will result in maximum value for stockholders, including actions that may result in a change in their position or standing within Whirlpool. The value of the severance benefits associated with a change in control of Whirlpool is based on a thorough review of competitive market practice. We believe that these benefits are of reasonable value and ultimately benefit stockholders. See the Potential Post-Termination Payments Tables section later in this proxy statement.
Deductibility of Executive Compensation
The Committee intends to preserve the tax deductibility of executive compensation under Section 162(m) of the Internal Revenue Code to the extent practicable while focusing on consistency with its compensation policies, the needs of Whirlpool, and stockholder interests. Whirlpools stockholders have approved PEP and our omnibus stock and incentive plans that award our long-term incentives to executives. Many of the types of awards authorized in these and other stockholder-approved plans would be considered qualifying performance-based compensation for purposes of Section 162(m). As a result, such awards would not count toward the $1 million deduction limit. However, the Committee retains the ability to make payments in one or more of the programs described in this report that may not qualify for tax deductibility under Section 162(m).
Retirement Benefits
NEOs are eligible for retirement benefits designed to provide, in total, a market-competitive level of income replacement upon achieving retirement eligibility by using a combination of qualified and non-qualified plans. We assess retirement benefits for NEOs against data provided to the Towers Perrin Employee Benefits Information Center by other
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U.S. companies that provide survey data on executive benefits. The Towers Perrin Employee Benefits Information Center database contains information on over 700 companies of varying size, competing in a variety of industries.
Accordingly, this survey tool includes data on a much broader base of companies than those included in the executive compensation comparator group. This assessment is an important factor used by the Committee in determining the median retirement income replacement ratio among similarly situated executives at such companies as the targeted amount of total retirement benefits for our NEOs. Total retirement benefits are provided through a combination of qualified and non-qualified defined contribution plans and qualified and non-qualified defined benefit plans. As a result of the current mix of our retirement plans, we believe that total retirement benefits for the NEOs are slightly below the median level when compared to the other companies in the survey. Whirlpool continues to strive to provide retirement benefits that are market-competitive.
U.S.-based NEO Defined Contribution Plans
Our NEOs in the United States participate in one qualified defined contribution plan, the Whirlpool 401(k) Retirement Plan, and the following non-qualified defined contribution plans: the Executive Deferred Savings Plan II (EDSP II) and its predecessor, the Executive Deferred Savings Plan (EDSP I). These plans allow eligible employees, including the NEOs, to defer portions of their base salary, annual cash incentive payment, restricted stock unit distribution, and performance cash unit payment into the plans.
The Whirlpool 401(k) Retirement Plan provides a defined contribution retirement benefit qualified under Section 401(k) of the Internal Revenue Code. This plan offers participants a pre-tax retirement savings vehicle plus employer contributions that encourage participant retirement savings and provide additional assets for employees retirement. Most employees of Whirlpool are eligible to participate in this plan, although different levels of employer contributions apply to different groups. This plan provides an automatic employer contribution of 3% of pay payable in cash or company stock. Through 2008, the 401(k) plan provided for an employer match of up to 4% of pay, provided that participants contributed at least 5% of pay on a pre-tax basis to the plan and subject to contribution and benefit limitations under the Internal Revenue Code. The employer match was suspended for all participants in 2009.
EDSP I is a non-qualified plan designed to provide executives with pre-tax deferral opportunities beyond those offered by the Whirlpool 401(k) Retirement Plan. Participants may no longer make deferrals to EDSP I. EDSP II became effective January 1, 2005 to comply with the requirements of Section 409A of the Internal Revenue Code. EDSP II includes two components: the traditional component is known as EDSP II and the new component, which became effective January 1, 2007, is known as the Whirlpool Executive Restoration Plan (the 401(k) Restoration Plan). The traditional component allows eligible executives to contribute up to 75% of their short-term incentives and long-term incentives. The 401(k) Restoration Plan works with the Whirlpool 401(k) Retirement Plan to enable executives to defer funds and
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receive Whirlpool matching contributions and non-elective contributions using the same formula as the Whirlpool 401(k) Retirement Plan, but without regard to limitations imposed by the Internal Revenue Code. Amounts deferred into this plan have already been earned by the executives and have been deferred through a voluntary enrollment process. These values are unfunded and are paid from Whirlpools general assets.
U.S.-based NEO Defined Benefit Plans
Messrs. Fettig, Templin and Todman accrued benefits under the Whirlpool Employees Pension Plan (WEPP) and the associated Whirlpool Retirement Restoration Plan (the Pension Restoration Plan) through December 31, 2006, when plan benefits were frozen. Messrs. Fettig, Templin, Todman and Bitzer currently participate in the Supplemental Executive Retirement Plan (SERP). These plans provide a defined benefit upon retirement relative to base salary and annual cash incentive earned during the employment period. The formulas for these programs are designed to provide a benefit at the median of the competitive market and support Whirlpools overall retirement benefit goal of providing a median level of replacement income upon retirement.
WEPP is a qualified plan that provides all eligible employees, which includes most Whirlpool salaried employees in the United States, with a defined pension benefit upon reaching retirement eligibility as described under the caption Pension Benefits Table later in this proxy statement. Benefits in this plan have been frozen for most participants including the NEO participants effective December 31, 2006 based on their service and pay as of December 31, 2006.
The Pension Restoration Plan is a non-qualified plan that works with WEPP to provide Whirlpool executives that portion of their retirement benefit which would have been paid under WEPP if Internal Revenue Code maximum annual benefits and compensation limitations did not apply. Benefits under this plan are frozen as of the same dates as benefits under WEPP as described above. Years of service are calculated under this plan using the same method employed under WEPP. The plan does not grant additional years of service credits to our NEOs.
SERP is a non-qualified plan that supplements Whirlpools broad-based retirement plan and provides benefits in excess of Internal Revenue Code limitations under WEPP. SERP generally provides retirement income based on the average of the highest five payouts received under PEP during the last ten years of employment multiplied by years of service. Years of service are calculated under this plan using the same method employed under WEPP. SERP does not grant additional years of service credits to our NEOs. Other companies may reflect the value of incentive compensation, like PEP, in their qualified plan benefit formulas. In contrast, WEPP calculates benefits based solely on salary. Therefore, SERP is designed to further our goal of providing Whirlpool executives with a level of income replacement compensation at retirement that approximates the median when compared to the other companies in the Towers Perrin survey discussed above.
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NEOs based outside the U.S.
Our NEOs in locations outside the United States receive retirement benefits designed to be competitive with benefits provided to executives in comparable positions within their regions. As an executive in Italy during 2008, Mr. Bitzer was subject to the National Collective Agreement for Industrial Dirigenti, which stipulates certain compensatory arrangements and benefits for industrial executives in Italy. One of the benefits mandated by the agreement is a voluntary defined contribution plan, Previndai, to which both Mr. Bitzer and Whirlpool contributed. As of 2009, Mr. Bitzer is eligible to participate in the U.S.-based defined contribution plans and SERP described above.
Pursuant to the terms of his employment contract, Mr. Periquito participates in the Founder Pension Plan, a non-U.S. retirement plan, to which both Mr. Periquito and Whirlpool contributed. In 2006, the pension asset and obligation attributable to Mr. Periquito were transferred to a private pension fund with Bradesco Bank pursuant to the terms of the Founder Pension Plan. The benefit under this plan is fully accrued and funded. No further contributions are expected to be made to this private pension fund. Mr. Periquito is able to draw from the reserve prior to and during retirement.
Stock Ownership Guidelines
Stock ownership guidelines support the objective of increasing the amount of stock owned by senior Whirlpool leaders. These ownership guidelines are approved by the Committee and are based on a review of competitive market practice as conducted by the independent executive compensation advisor to the Committee, as well as to ensure that our NEOs and other senior Whirlpool leaders have a significant stake in Whirlpools long-term success. The guidelines for stock ownership are based on an individuals level in the organization and range from seven times base salary for the Chief Executive Officer to one-half times base salary for lower level executives, including those who are not NEOs. Ownership guidelines as a multiple of base salary for NEOs are listed below:
CEO: | 7 times base salary | |
President: | 5 times base salary | |
Executive Vice Presidents: | 4 times base salary |
The guidelines state that each executive should achieve the required level of stock ownership within five years. For these guidelines, ownership includes shares purchased on the open market, shares owned jointly and separately by spouses and children, shares held in the Whirlpool 401(k) plan, shares obtained through stock option exercises (but not including unexercised stock options) and stock award distributions, and vested stock units (including those that have been deferred for distribution).
The Committee, as well as Whirlpools senior leadership, annually reviews progress for each executive on achieving their required level of ownership. During the Committees most recent review of ownership levels, it was determined that each NEO currently meets or is on track to meet his respective stock ownership guideline during the required timeframe.
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HUMAN RESOURCES COMMITTEE REPORT |
The Human Resources Committee of Whirlpools Board of Directors reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement.
Based upon this review and discussion, the Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Whirlpools Annual Report on Form 10-K for the year ended December 31, 2008, as incorporated by reference from this proxy statement.
HUMAN RESOURCES COMMITTEE
Dr. Paul G. Stern, Chair
Mr. Herman Cain
Mr. Michael F. Johnston
Mr. William T. Kerr
Mr. Miles L. Marsh
Mr. Michael D. White
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EXECUTIVE COMPENSATION TABLES |
The following table sets forth compensation information for our NEOs during the 2008, 2007, and 2006 fiscal years; however, 2006 information is not provided for Mr. Bitzer as he was not an NEO during fiscal year 2006. The table does not reflect the actual compensation received by our NEOs or the target compensation established for our NEOs by the Human Resources Committee for those periods. For example, amounts recorded in the stock awards and options columns reflect the FAS 123(R) compensation expense for all of the NEOs outstanding awards, (including awards granted prior to the indicated year) as recognized in our financial statements for that fiscal year. The recognized compensation expense will likely vary from the actual value realized by the NEO due to stock price fluctuations, forfeitures and differences between valuation assumptions and actual experience.
Name and Principal Position |
Year | Salary ($) | Bonus ($) | Stock Awards (1) ($) |
Option (1) ($) |
Non-Equity (2) ($) |
Change in Value and (3) ($) |
All
Other (4) ($) |
Total ($) | ||||||||||||||||
2008 | 1,262,500 | | 4,093,597 | 2,000,812 | 420,000 | 683,122 | 133,207 | 8,593,238 | |||||||||||||||||
Jeff M. Fettig Chairman of the Board and Chief Executive Officer |
2007 | 1,183,333 | | 5,094,224 | 1,180,245 | 6,962,500 | 930,008 | 138,226 | 15,488,536 | ||||||||||||||||
2006 | 1,083,333 | | 4,775,626 | 737,102 | 2,300,000 | 1,290,083 | 125,156 | 10,311,300 | |||||||||||||||||
2008 | 641,667 | | 1,281,149 | 229,837 | 312,869 | 60,254 | 56,781 | 2,582,557 | |||||||||||||||||
Roy W. Templin Executive Vice President and Chief Financial Officer |
2007 | 591,667 | | 1,369,963 | 134,603 | 1,922,813 | 67,407 | 39,841 | 4,126,294 | ||||||||||||||||
2006 | 541,667 | | 1,028,882 | 72,104 | 1,131,250 | 91,714 | 3,087 | 2,868,704 | |||||||||||||||||
2008 | 753,333 | | 1,614,031 | 464,135 | 188,333 | 192,160 | 125,613 | 3,337,605 | |||||||||||||||||
Michael A. Todman President, Whirlpool North America |
2007 | 708,333 | | 1,803,096 | 260,484 | 2,142,313 | 202,240 | 166,031 | 5,282,497 | ||||||||||||||||
2006 | 650,000 | | 1,590,591 | 176,086 | 825,000 | 288,651 | 129,077 | 3,659,405 | |||||||||||||||||
2008 | 729,168 | 100,008 | (6) | 204,204 | 622,337 | 1,012,815 | | (7) | 225,776 | 2,894,308 | |||||||||||||||
Paulo F. M. Periquito (5) President, Whirlpool International |
2007 | 671,643 | 87,504 | (6) | 1,387,997 | 136,917 | 3,402,155 | | (7) | 166,470 | 5,852,686 | ||||||||||||||
2006 | 645,000 | 75,000 | (6) | 1,341,200 | 368,283 | 2,112,375 | 2,508,000 | 164,448 | 7,214,306 | ||||||||||||||||
Marc R. Bitzer (5) Executive Vice President and President, U.S. Operations |
2008 | 713,378 | | 847,533 | 187,446 | 234,052 | | 105,222 | 2,087,631 | ||||||||||||||||
2007 | 625,340 | | 896,856 | 108,109 | 1,519,759 | | 82,173 | 3,232,237 |
(1) | See Note 10 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the 2008 fiscal year for a discussion of the relevant assumptions used in calculating the compensation cost. Under FAS No. 123(R), the fair value of stock and option awards is recognized as expense over the vesting period of the award. If the award agreements provide that vesting is accelerated upon retirement, the award will be expensed over the period from the grant date through the date the NEO becomes retirement-eligible. These columns include the full expense of outstanding stock and option awards for Mr. Periquito who became retirement-eligible in 2007. |
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(2) | Represents the sum of cash awards earned in 2008 under PEP. For Messrs. Templin, Periquito and Bitzer this amount also includes earned 2008 performance cash units. The 2008 performance cash unit awards are subject to time-based vesting and will not be paid out until February 2011. The individual PEP and performance cash unit awards that comprise the total value in the Non-Equity Incentive Plan Compensation column above for our NEOs were: |
Name | 2008 PEP Award ($) | 2008 Performance Cash Award (earned, but unvested) ($) |
Total ($) | |||
Jeff M. Fettig |
420,000 | | 420,000 | |||
Roy W. Templin |
204,531 | 108,338 | 312,869 | |||
Michael A. Todman |
188,333 | | 188,333 | |||
Paulo F. M. Periquito |
875,002 | 137,813 | 1,012,815 | |||
Marc R. Bitzer |
144,032 | 90,020 | 234,052 |
(3) | Reflects the change in actuarial present value of these benefits from December 31, 2007 to December 31, 2008. See the Pension Benefits Table for the actuarial present value of these benefits. None of our NEOs received above-market earnings on their non-qualified deferred compensation accounts. |
(4) | The following table presents an itemized account of the amounts shown in the All Other Compensation column for each NEO in 2008: |
Name | Personal Use of Whirlpool Aircraft(a) ($) |
Car & Driver(b) |
Other Perquisites(c) |
Insurance Premiums(d) ($) |
Defined Contribution Plan Contributions(e) ($) |
Total ($) |
||||||||||||
Jeff M. Fettig |
83,283 | | 33,824 | | 16,100 | 133,207 | ||||||||||||
Roy W. Templin |
23,114 | | 20,517 | | 13,150 | 56,781 | ||||||||||||
Michael A. Todman |
108,804 | | 1,657 | | 15,152 | 125,613 | ||||||||||||
Paulo F. M. Periquito |
| 144,668 | 10,323 | 70,785 | | 225,776 | ||||||||||||
Marc R. Bitzer |
| 35,055 | 45,445 | 18,255 | 6,467 | 105,222 |
(a) | Our incremental cost for personal use of Whirlpool aircraft is calculated by multiplying the aircrafts hourly variable operating cost by a trips flight time, which includes any flight time of an empty return flight. Variable operating costs are based on industry standard rates of our variable operating costs, including fuel costs, trip-related maintenance, landing/ramp fees and other miscellaneous variable costs. On certain occasions, a spouse or other family member may accompany one of our NEOs on a flight. No additional operating cost is incurred in such situations under the foregoing methodology. We do not pay our NEOs any amounts in connection with taxes on income imputed to them for personal use of our aircraft. |
(b) | For Mr. Periquito, this amount includes $33,292 for the incremental cost to Whirlpool of providing a car and $111,376 for the incremental cost to Whirlpool of providing a driver. We calculated the incremental cost of the driver by using the actual employment cost to Whirlpool during 2008 and of the car by using the value of (1) the purchase price divided by four (for the expected usage of the car in years) and (2) the annual cost of insurance, maintenance, and registration. For Mr. Bitzer, this value represents $35,055 for the incremental cost to Whirlpool of providing a car. |
(c) | Represents the incremental cost to Whirlpool of: Whirlpool products offered at discounted prices; financial planning services; personal use of property that we own or lease primarily for business purposes; reimbursement of childrens educational costs related to expatriate status; and home security. Individually, none of these categories of perquisites or personal benefits exceeded $25,000 for any single NEO. |
(d) | Represents Whirlpools payments to provide certain privately funded life, medical and dental insurance programs to non-U.S. based NEOs. |
(e) | Represents Whirlpools contributions to the 401(k) Retirement Plan for Messrs. Fettig, Templin, and Todman. Represents Whirlpools contributions to Previndai, a voluntary savings plan for executives (dirigenti) in Italy, for Mr. Bitzer. |
(5) | Compensation values shown for Mr. Bitzer have been converted from Euros to U.S. dollars using the average currency conversion rate for each respective year. For Mr. Periquito, all compensation values for 2006 and 2007, and All Other Compensation values for 2008 have been converted from Brazilian Real to U.S. dollars using the average currency conversion rate for each respective year. |
(6) | Represents additional compensation for increased living costs outside the United States. |
(7) | No change in actuarial value is reflected due to transfer of the asset and obligation to a private pension account in 2006. |
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The following table provides additional information about plan-based compensation disclosed in the Summary Compensation Table. During 2008, we granted short-term cash incentives under the Performance Excellence Plan (PEP awards) and long-term incentives using stock options, performance cash units and performance-based restricted stock units under the Whirlpool Corporation 2007 Omnibus Stock and Incentive Plan.
Stock option grants are issued with an exercise price equal to the closing price of our common stock on the New York Stock Exchange on the grant date. The option term is ten years and options vest in three equal annual installments. If the executive dies, becomes disabled, or retires the stock options (whether vested or unvested) become vested and may be exercised until the earlier of the expiration date and three years from the date of death or disability or five years from the date of retirement as applicable. In the event of death, the option may be exercised one year beyond the date of death, even if this is beyond the expiration date. However, the option may not be exercised earlier than the first anniversary date of the grant. In other instances, vested stock options expire immediately upon termination of employment.
From time to time, the Committee grants restricted stock unit awards subject only to time-based vesting conditions. The Committee did not grant any awards of this type to NEOs in 2008. In 2008, the Committee established target and maximum restricted stock unit and performance cash unit awards to be determined based on the achievement of specified objectives during the 2008 fiscal year (the performance period). The Committee made awards in 2009, basing the number of restricted stock units and performance cash units awarded on the level of achievement of 2008 objectives. These awards are subject to a two year vesting period. Upon vesting, restricted stock units convert on a one-for-one basis to shares of common stock. Upon vesting, performance cash units entitle an executive to receive a cash payment equal to the dollar amount awarded.
Generally, an executive must be employed by Whirlpool on the last day of the performance period in order to obtain PEP, performance-based restricted stock unit or performance cash unit awards. However, if an executive dies, becomes disabled, or retires after a minimum of six months of the performance period has been completed but prior to the end of the performance period and at the end of the performance period the Committee determines that the performance objectives have been met, the Committee may determine to award the NEO executive or his beneficiaries, if applicable, a portion of the award. With respect to performance-based restricted stock unit and performance cash unit awards, if an executive dies, becomes disabled, or retires after the completion of the performance period, but prior to the vesting date of the award, vesting and distribution are accelerated.
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Name |
Grant |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($) |
Estimated Future Payouts Under Equity |
All Other (#) |
All
Other (#) |
Exercise or Base Price of Option Awards ($/Share) |
Grant Date Fair Value of Stock and Option Awards (4) ($) |
|||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||
Jeff M. Fettig | ||||||||||||||||||||||||||||||
PEP Cash(1) | |
1,767,500 | 3,000,000 | |||||||||||||||||||||||||||
Performance RSUs(2) | 2/18/2008 | |
42,250 | 84,500 | 1,747,038 | |||||||||||||||||||||||||
Stock Options | 2/18/2008 | 120,700 | 88.49 | 2,544,356 | ||||||||||||||||||||||||||
Roy W. Templin | ||||||||||||||||||||||||||||||
PEP Cash(1) | | 545,417 | 2,117,507 | |||||||||||||||||||||||||||
Performance Cash Units(3) | | 433,350 | 866,700 | |||||||||||||||||||||||||||
Performance RSUs(2) | 2/18/2008 | | 4,900 | 9,800 | 202,615 | |||||||||||||||||||||||||
Stock Options | 2/18/2008 | 14,000 | 88.49 | 295,120 | ||||||||||||||||||||||||||
Michael A. Todman | ||||||||||||||||||||||||||||||
PEP Cash(1) | | 753,333 | 2,485,999 | |||||||||||||||||||||||||||
Performance RSUs(2) | 2/18/2008 | | 10,750 | 21,500 | 444,513 | |||||||||||||||||||||||||
Stock Options | 2/18/2008 | 30,700 | 88.49 | 647,156 | ||||||||||||||||||||||||||
Paulo F. M. Periquito | ||||||||||||||||||||||||||||||
PEP Cash(1) | | 729,168 | 2,406,254 | |||||||||||||||||||||||||||
Performance Cash Units(3) | 551,250 | 1,102,500 | ||||||||||||||||||||||||||||
Performance RSUs(2) | 2/18/2008 | | 6,229 | 12,458 | 257,569 | |||||||||||||||||||||||||
Stock Options | 2/18/2008 | 17,798 | 88.49 | 375,182 | ||||||||||||||||||||||||||
Marc R. Bitzer | ||||||||||||||||||||||||||||||
PEP Cash(1) | | 576,130 | 2,304,520 | |||||||||||||||||||||||||||
Performance Cash Units(3) | | 360,081 | 720,162 | |||||||||||||||||||||||||||
Performance RSUs(2) | 2/18/2008 | | 4,059 | 8,118 | 167,840 | |||||||||||||||||||||||||
Stock Options | 2/18/2008 | 11,596 | 88.49 | 244,444 |
(1) | Represents estimated possible payouts of short-term incentive awards for 2008 under PEP. See the column captioned Non-Equity Incentive Plan Compensation in the Summary Compensation Table for the actual payout amounts for 2008. |
(2) | Represents estimated possible restricted stock unit awards for 2008 performance. See the column captioned Stock Awards Number of Shares or Units of Stock That Have Not Vested in the Outstanding Equity Awards at Fiscal Year-End Table for actual awards. |
(3) | Represents estimated possible performance cash unit awards for 2008 performance for Messrs. Templin, Periquito, and Bitzer. See the column captioned Non-Equity Incentive Plan Compensation in the Summary Compensation Table for actual awards for 2008. In 2008, Messrs. Fettig and Todman did not receive performance cash unit awards as part of their long-term incentives. |
(4) | Represents the grant-date fair value calculated under FAS 123(R), as presented in our financial statements, for the 2008 fiscal year for the stock options. For the performance restricted stock unit awards for each NEO, the amount represents the target number of units multiplied by the closing price, $41.35, of Whirlpool common stock on December 31, 2008. |
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Outstanding Equity Awards at Fiscal Year-End
The table below lists outstanding equity grants for each NEO as of December 31, 2008. The table includes outstanding equity grants from past years as well as the current year.
Option Awards | Stock Awards | ||||||||||||||||||||||||||
Name |
Number of Securities Underlying Unexercised Options (Exercisable) (#) |
Number of Securities Underlying Unexercised Options (Unexercisable) (#) |
Equity (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested (3) ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) |
||||||||||||||||||
Jeff M. Fettig Stock Options (1) |
|||||||||||||||||||||||||||
1999 |
50,000 | | 52.28 | 4/5/2009 | |||||||||||||||||||||||
2000 |
64,000 | | 52.19 | 2/14/2010 | |||||||||||||||||||||||
2001 |
70,000 | | 54.07 | 2/19/2011 | |||||||||||||||||||||||
2002 |
70,000 | | 67.29 | 2/18/2012 | |||||||||||||||||||||||
2003 |
70,000 | | 49.60 | 2/17/2013 | |||||||||||||||||||||||
2004 |
40,000 | | 72.94 | 2/16/2014 | |||||||||||||||||||||||
2006 |
55,467 | 27,733 | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
30,334 | 60,666 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
120,700 | 88.49 | 2/18/2018 | ||||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2006 |
48,580 | (2) | 2,008,783 | (4) | |||||||||||||||||||||||
2007 |
32,000 | (5) | 1,323,200 | ||||||||||||||||||||||||
2008 |
10,563 | (6) | 436,780 | ||||||||||||||||||||||||
RSUs |
36,307 | (7) | 1,501,294 | ||||||||||||||||||||||||
Special Recognition RSUs |
25,000 | (11) | 1,033,750 | ||||||||||||||||||||||||
Roy W. Templin Stock Options (1) |
|||||||||||||||||||||||||||
2003 |
10,000 | | 62.98 | 7/01/2013 | |||||||||||||||||||||||
2004 |
2,664 | | 72.94 | 2/16/2014 | |||||||||||||||||||||||
2006 |
6,200 | 3,100 | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
3,534 | 7,066 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
14,000 | 88.49 | 2/18/2018 | ||||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2006 |
5,397 | (2) | 223,166 | (4) | |||||||||||||||||||||||
2007 |
3,750 | (5) | 155,063 | ||||||||||||||||||||||||
2008 |
1,225 | (6) | 50,654 | ||||||||||||||||||||||||
RSUs |
25,000 | (8) | 1,033,750 | ||||||||||||||||||||||||
Special Recognition RSUs |
15,000 | (11) | 620,250 |
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Option Awards | Stock Awards | ||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (Exercisable) (#) |
Number of Securities Underlying Unexercised Options (Unexercisable) (#) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option ($) |
Option Expiration Date |
Number (#) |
Market Value ($) |
Equity (#) |
Equity ($) |
||||||||||||||||||
Michael A. Todman Stock Options (1) |
|||||||||||||||||||||||||||
2002 |
27,000 | | 67.29 | 2/18/2012 | |||||||||||||||||||||||
2004 |
10,282 | | 72.94 | 2/16/2014 | |||||||||||||||||||||||
2006 |
12,800 | 6,400 | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
6,367 | 12,733 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
30,700 | 88.49 | 2/18/2018 | ||||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2006 |
11,163 | (2) | 461,590 | (4) | |||||||||||||||||||||||
2007 |
6,700 | (5) | 277,045 | ||||||||||||||||||||||||
2008 |
2,688 | (6) | 111,149 | ||||||||||||||||||||||||
RSUs |
62,721 | (9) | 2,593,513 | ||||||||||||||||||||||||
Special Recognition RSUs |
7,500 | (11) | 310,125 | ||||||||||||||||||||||||
Paulo F. M. Periquito Stock Options (1) |
|||||||||||||||||||||||||||
2003 |
33,000 | | 49.60 | 2/17/2013 | |||||||||||||||||||||||
2004 |
12,339 | | 72.94 | 2/16/2014 | |||||||||||||||||||||||
2006 |
6,890 | 3,445 | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
3,252 | 6,502 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
17,798 | 88.49 | 2/18/2018 | ||||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2006 |
6,330 | (2) | 261,746 | (4) | |||||||||||||||||||||||
2007 |
4,436 | (5) | 183,429 | ||||||||||||||||||||||||
2008 |
1,557 | (6) | 64,382 | ||||||||||||||||||||||||
Marc R. Bitzer Stock Options (1) |
|||||||||||||||||||||||||||
2004 |
3,563 | | 75.32 | 2/16/2014 | |||||||||||||||||||||||
2006 |
4,621 | 2,311 | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
3,049 | 6,096 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
11,596 | 88.49 | 2/18/2018 | ||||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2006 |
4,246 | (2) | 175,572 | (4) | |||||||||||||||||||||||
2007 |
3,201 | (5) | 132,361 | ||||||||||||||||||||||||
2008 |
1,015 | (6) | 41,970 | ||||||||||||||||||||||||
RSUs |
55,805 | (10) | 2,307,537 |
(1) | As shown in the table above, each NEO has three awards with remaining unvested stock options listed in this column. These awards represent grants from 2006, 2007 and 2008. Stock options generally vest and become exercisable in equal installments on the first, second, and third anniversary of the grant date. As of the last day of our 2008 fiscal year, the awards granted in 2006 had one remaining vesting date, February 20, 2009; the awards made in 2007 had two vesting |
45
dates remaining, February 19, 2009, and February 19, 2010. The awards made in 2008 have three vesting dates remaining, February 18, 2009, February 18, 2010, and February 18, 2011. |
(2) | Represents restricted stock units earned for 2006 performance, but subject to time-based vesting and unvested as of December 31, 2008. Shares of common stock were distributed on February 20, 2009. |
(3) | Represents earned, but unvested restricted stock units multiplied by the closing price, $41.35, of our common stock on December 31, 2008. The ultimate value of the awards will depend on the value of our common stock on the actual vesting date. |
(4) | The value of the awards as of the February 20, 2009 vesting date was as follows, Mr. Fettig, $1,275,225; Mr. Templin, $141,671; Mr. Todman, $293,029; Mr. Periquito, $166,163; Mr. Bitzer, $111,458. |
(5) | Represents earned, but unvested restricted stock units granted for 2007 performance. Although earned in 2007, these restricted stock units are subject to time-based vesting and shares will not be distributed until February 19, 2010. |
(6) | Represents earned, but unvested restricted stock units granted for 2008 performance. Although earned in 2008 (at 25% of target level), these restricted stock units are subject to time-based vesting and shares will not be distributed until February 19, 2011. |
(7) | Represents unvested time-based restricted stock units which will vest and be distributed in shares of common stock as follows: 13,807 upon retirement; 22,500 on July 1, 2011. Deferred vested units and units vesting upon retirement are credited with dividend equivalents until distribution. |
(8) | Represents unvested time-based restricted stock units which will vest and be distributed in shares of common stock as follows: 10,000 on September 1, 2011; 7,500 on June 18, 2010; 7,500 on June 18, 2014. |
(9) | Represents unvested time-based restricted stock units which will vest and be distributed in shares of common stock as follows: 47,721 upon retirement; 15,000 on July 1, 2011. Deferred vested units and units vesting upon retirement are credited with dividend equivalents until distribution. |
(10) | Represents unvested time-based restricted stock units which will vest and be distributed in shares of common stock as follows: 31,153 upon retirement; 10,000 on July 1, 2011; 14,652 on July 1, 2018. Deferred vested units and units vesting upon retirement are credited with dividend equivalents until distribution. |
(11) | Represents unvested restricted stock units granted in recognition of the NEOs contribution to the acquisition and integration of Maytag. These special recognition stock units are subject to time-based vesting and shares of stock will be distributed on August 12, 2009. |
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Option Exercises and Stock Vested
The table below summarizes the value received from stock option exercises and stock grants vested in 2008.
Name | Option Awards | Stock Awards | ||||||||||
Number of Shares Acquired on Exercise (1) (#) |
Value Realized on Exercise (2) ($) |
Number of Shares Acquired on Vesting (3) (#) |
Value Realized on Vesting (4) ($) |
|||||||||
Jeff M. Fettig |
18,000 | 106,290 | 93,689 | 8,367,454 | ||||||||
Roy W. Templin |
| | 12,855 | 1,151,550 | ||||||||
Michael A. Todman |
| | 30,358 | 2,704,346 | ||||||||
Paulo F. M. Periquito |
99,000 | 2,893,440 | 38,008 | 3,384,592 | ||||||||
Marc R. Bitzer |
| | 15,102 | 1,342,755 |
(1) | Option awards exercised by Mr. Fettig were granted on June 15, 1998. Option awards exercised by Mr. Periquito were granted on February 14, 2000, 33,000; February 19, 2001, 33,000; and February 18, 2002, 33,000. |
(2) | The dollar value realized on the exercise of stock options represents the pre-tax difference (fair market value of Whirlpool common stock on the exercise date minus the exercise price of the option) multiplied by the number of shares of common stock covered by the stock options held by each NEO. |
(3) | Reflects shares distributed as a result of the vesting of restricted stock unit awards. |
(4) | The dollar value realized represents the pre-tax value received by each NEO upon the vesting of the stock unit awards. The value realized is based on the closing stock price of Whirlpool stock on the New York Stock Exchange on that vesting date. |
The following table describes the estimated actuarial present value of accrued pension benefits through the end of our 2008 fiscal year for each of our NEOs listed in the table. Our U.S.-based NEOs are entitled to benefits under the Whirlpool Employees Pension Plan (WEPP), the Whirlpool Retirement Benefit Restoration Plan (Pension Restoration Plan), and the Whirlpool Supplemental Executive Retirement Plan (SERP). None of our U.S.-based NEOs are retirement-eligible as of the last day of our 2008 fiscal year. The number of years of service credited to each NEO equals the NEOs length of eligible service with Whirlpool. Whirlpool currently has a policy against crediting additional years of service under the following pension plans.
For benefits under WEPP, the formula is:
2% x years of service x average base salary |
In this formula:
| years of service for salaried employees is generally based on hours worked as a salaried employee and also includes hours paid but not worked (such as vacations and holidays), hours of military service required to be recognized under federal law, and hours for up to 24 months of long-term disability; |
47
| average base salary generally means the average of base salary in effect during the 60 sequential (but not necessarily consecutive) full calendar months of a participants last 120 or fewer consecutive full calendar months of service before retirement or other termination of service that will produce the largest average monthly amount; and |
| the maximum number of years of service credited under the plan is 30 years. |
Retirement benefits under this formula are limited by the Internal Revenue Code. Benefits can be paid to plan participants in a variety of annuity forms or as a lump sum amount. The benefits payable to our NEOs from this plan were frozen as of December 31, 2006.
After reaching age 55 and completing five years of service with Whirlpool, salaried participants in this plan are eligible for early retirement benefits under the plan. Benefits paid prior to age 65 are reduced. The factors used to determine this reduction vary with the participants age. For example, for salaried participants whose benefits have vested and who retire from active service at age 55, their retirement benefits are reduced to 55% of the full retirement benefit payable at age 65. None of our NEOs who participate in this plan were eligible for early retirement as of the last day of our 2006 fiscal year.
Under the Pension Restoration Plan, the retirement eligibility and benefit formula are the same as under WEPP, except that in this plan statutory benefit limitations are not applied in calculating benefits under the formula. With respect to our NEOs who participate in this plan, payments under this plan are generally made in a lump sum after the later of: (1) six months following termination of employment or (2) the participants reaching age 55. Participants may not make withdrawals during their employment. The benefits payable to our NEOs from this plan were frozen as of December 31, 2006.
With respect to benefits under SERP, the formula is:
2% x years of service x average of the highest 5 PEP awards received over the last ten years |
In this formula:
| years of service has the same meaning as it does under WEPP described above; and |
| the maximum number of years of service credited under the plan is 30 years. |
Our NEOs are eligible for benefits under SERP if they terminate employment for any reason except a termination for Cause after early retirement age or normal retirement age, or after completing five years of service, provided they have received one or more PEP awards within the last ten calendar years preceding their termination of employment. Executives may also be eligible for SERP benefits if they terminate employment prior to early retirement age or before completing five years of service due to the existence of a long-term disability.
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Normal retirement means retiring on or after the normal retirement age, which is generally the later of the executives 65th birthday or completion of five years of continuous service. Participants in this plan may select among the following payment distribution options: lump sum seven months following termination; lump sum in the year following the year of termination; or ten annual installments.
The actuarial present values of benefits under these plans are calculated in accordance with the following assumptions: (1) discount rate: 2008 6.1% and 2007 6.2%; (2) assumed retirement age: 65; (3) no pre-retirement decrements; (4) assumed form of payment: lump sum, determined as equal to the present value of the life annuity provided by the plans formulas and calculated based on the plans provisions, including an interest rate based on high-quality corporate bond yields (assumed to be 6.1%) and mortality assumption that is based on the RP-2000 Table. The actuarial increase during our 2008 fiscal year of the projected retirement benefits can be found in the Summary Compensation Table in the Change in Pension Value and Non-Qualified Deferred Compensation Earnings column (all amounts reported under that heading represent actuarial increases in our plans).
Mr. Periquito became retirement-eligible as of the last day of our 2007 fiscal year. Both Mr. Periquito and Whirlpool contributed to his benefit under the Founder Pension Plan, a non-U.S. pension plan, prior to its transfer to a private pension fund in 2006. Whirlpool has not made any contributions to the fund since 2006 and expects to make no future contributions to the fund. Any change in pension value from the prior year is solely due to the change in the conversion rate from Brazilian Real to the U.S. Dollar. Mr. Periquito may draw from the fund prior to and during retirement. Mr. Bitzer is eligible to participate in SERP beginning in 2009, but will not receive a benefit unless he completes five years of service in the plan.
Name | Plan Name | Number of Years Credited Service (#) |
Present Value of Accumulated Benefit ($) |
Payments During Last Fiscal Year ($) | ||||
Jeff M. Fettig |
WEPP | 26 | 539,589 | | ||||
Pension Restoration |
26 | 1,692,621 | | |||||
SERP |
28 | 4,521,525
Total 6,753,735 |
| |||||
Roy W. Templin |
WEPP | 4 | 59,432 | | ||||
Pension Restoration |
4 | 53,677 | | |||||
SERP |
6 | 206,338
Total 319,447 |
| |||||
Michael A. Todman |
WEPP | 14 | 277,379 | | ||||
Pension Restoration |
14 | 441,753 | | |||||
SERP |
16 | 980,417
Total 1,699,549 |
| |||||
Paulo F. M. Periquito |
Private Pension Fund | | 10,685,244 | |
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Non-Qualified Deferred Compensation
The table below provides information about the non-qualified defined contribution deferred compensation plans in which our NEOs participate. Some of our U.S.-based NEOs participate in the Whirlpool Corporation Executive Deferred Savings Plan (EDSP I) and the Whirlpool Corporation Executive Deferred Savings Plan II (EDSP II). EDSP I was designed to provide executives with pre-tax deferral opportunities beyond those offered by the Whirlpool 401(k) Retirement Plan. Participants may no longer make deferrals to EDSP I. EDSP II became effective January 1, 2005 to comply with the requirements of new Code Section 409A.
EDSP II includes two components: the traditional component is known as EDSP II and the new component, which became effective January 1, 2007, is known as the Whirlpool Executive Restoration Plan (the 401(k) Restoration Plan). The traditional EDSP II is designed to provide executives with pre-tax deferral opportunities beyond those offered by the Whirlpool 401(k) Retirement Plan and the 401(k) Restoration Plan. Eligible executives may elect to contribute up to 75% of their short-term incentives and long-term incentives under this component. For our NEOs, the 401(k) Restoration Plan treats base salary as the only form of compensation eligible for deferral under the plan.
An EDSP I participant may elect distribution following termination of employment in the form of a lump sum or in a number of monthly installments designated by the participant. A participant in EDSP II may select among the following post-termination distributions options; lump sum seven months following termination, lump sum in the year following the year of termination, or ten annual installments.
EDSP I and EDSP II (including both the traditional component and the 401(k) Restoration Plan component) are unfunded non-qualified plans that are secured by our general assets. Amounts deferred are credited to recordkeeping accounts for participants, and the recordkeeping balances are credited with earnings and losses measured by investments generally similar to those selected by executives and available in the Whirlpool 401(k) Retirement Plan. Participants may not make withdrawals during their employment, except in the event of hardship, as approved by the Human Resources Committee.
As an executive in Italy, Mr. Bitzer participated in Previndai, a voluntary defined contribution plan mandated by the National Collective Agreement for Industrial Dirigenti. Both Mr. Bitzer and Whirlpool made contributions to his Previndai account, as reflected in the Summary Compensation Table. Mr. Bitzer will be eligible to participate in EDSP II for the 2010 plan year. Mr. Periquito does not participate in any non-qualified defined contribution or other non-qualified deferred compensation plans.
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Name | Executive Contributions in Last FY (1) ($) |
Registrant Contributions in Last FY (2) ($) |
Aggregate Earnings in Last FY (3) ($) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at Last FYE (4) ($) |
|||||||||
Jeff M. Fettig |
||||||||||||||
EDSP I |
| | (797,678 | ) | |
1,004,461 | ||||||||
EDSP II |
3,121,589 | | (2,014,228 | ) | | 1,926,520 | ||||||||
401(k) Restoration |
56,625 | 154,639 | (117,030 | ) | | 261,106 | ||||||||
Total |
3,178,214 | 154,639 | (2,928,936 | ) | | 3,192,087 | ||||||||
Roy W. Templin |
||||||||||||||
EDSP I |
| | | | | |||||||||
EDSP II |
113,691 | | (107,591 | ) | | 216,062 | ||||||||
401(k) Restoration |
54,435 | 58,786 | (38,712 | ) | | 158,364 | ||||||||
Total |
168,126 | 58,786 | (146,303 | ) | | 374,426 | ||||||||
Michael A. Todman |
||||||||||||||
EDSP I |
| | (251,918 | ) | | 403,493 | ||||||||
EDSP II |
| | (62,587 | ) | | 104,385 | ||||||||
401(k) Restoration |
| 50,500 | (19,640 | ) | | 68,918 | ||||||||
Total |
| 50,500 | (334,145 | ) | | 576,796 |
(1) | The amount of contributions made by each NEO, as reported above, is also included in each NEOs compensation reported under the Summary Compensation Table, either as Salary, Non-Equity Incentive Plan Compensation or Stock Awards. |
(2) | Represents the amount of the contributions made by Whirlpool to each NEO under the 401(k) Restoration Plan. |
(3) | The aggregate earnings are not reported in the Summary Compensation Table. |
(4) | The aggregate balance at December 31, 2008, as reported above, reflects amounts that either are currently reported or were previously reported as compensation in the Summary Compensation Table for 2008 or prior years, except for the aggregate earnings on deferred compensation. |
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Potential Post-Termination Payments
The tables below describe the compensation and benefits payable to each of our NEOs in the following circumstances: involuntary termination by Whirlpool for cause, involuntary termination by Whirlpool without cause, resignation, retirement, death, disability, and change in control (with and without a qualifying termination). The amounts shown assume that termination of employment or a change in control occurred as of December 31, 2008, and estimate certain amounts which would be paid to our NEOs upon the specified event. Due to the number of factors that affect the nature and amounts of compensation and benefits provided upon the events discussed below, the actual amounts paid or distributed may be different. Factors that could greatly affect these amounts include the timing during the year of any such event, Whirlpools stock price, and the NEOs age.
The tables quantify and the accompanying narrative disclosure describes the compensation and benefits that are paid in addition to compensation and benefits generally available to salaried employees. Examples of compensation and benefits generally available to salaried employees, and thus not included below, are distributions under the Whirlpool 401(k) Retirement Plan, accrued vacation pay, and, in certain circumstances, vested equity.
Involuntary Terminations and Resignation
We provide no additional benefits to any of our NEOs in the event that the NEO resigns from Whirlpool. Also, we do not have employment agreements with any of our NEOs that would provide benefits in the event that we terminate the NEOs employment involuntarily for cause. Upon resignation and involuntary termination for cause, and in accordance with the terms of the long-term incentive awards granted under our incentive programs, our NEOs forfeit all unvested performance-based restricted stock units and performance cash units, as well as all unvested, and vested, but unexercised options. Generally, in the event we terminate the employment of an NEO involuntarily without cause, the payment of the value of certain unvested time-based restricted stock units is the only benefit to which the NEO is entitled. The amounts reflected in the table below do not include amounts payable under the severance policy generally applicable to all U.S. salaried employees. Under Italian law, in the event of termination without cause, Mr. Bitzer was also entitled to a lump sum severance benefit equal to one year of salary, plus the average of his last three awards received through participation in PEP, plus an accrued lump sum statutory severance indemnity payment equal to 70,955 (approximately U.S. $104,000). The severance benefit provided to Mr. Bitzer in the event of involuntary termination without cause is generally available to all employees in his classification and is, therefore, not reflected below. As of 2009, Mr. Bitzer is not eligible for this benefit. Under the terms of his employment agreement, Mr. Periquito is entitled to an amount equal to 13.82 months of base salary, in the event of termination without cause. The Committee may, in its discretion, approve additional severance benefits designed to mitigate economic injury to the NEO as a direct result of the termination.
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Retirement
Among our NEOs, only Mr. Periquito is retirement-eligible as of the last day of our 2008 fiscal year, and, thus, he may take a full distribution of his pension plan benefit at any time, including prior to retirement. Since the other NEOs are not retirement-eligible, if these NEOs chose to retire as of the last day of our 2008 fiscal year, the effect of that retirement would be the same as if the NEO had resigned, as described immediately above. Since none of our NEOs (other than Mr. Periquito) is retirement-eligible, the following quantification of estimated compensation and benefits payable at retirement, as well as the accompanying narrative disclosure, assume that each of our NEOs was retirement-eligible as of the end of our 2008 fiscal year.
In the event of retirement, our NEOs would be entitled to a mix of short- and long-term incentives. The possible short-term incentive payout would consist of a prorated cash payout under PEP for the fiscal year in which the NEO retires, provided that the objective performance goal for that year is met. Proration is based on the ratio of the number of days worked during the performance period to the total number of days in the performance period. The Committee met on February 16, 2009 and determined the PEP awards earned for 2008. An NEO who retired during 2008 would receive a payout based on the amounts approved by the Committee.
For the purposes of the table below and consistent with our assumption that each of our NEOs is retirement-eligible, we include a value showing the full vesting of certain unvested long-term incentive awards for the completed 2006 and 2007 performance periods. Vesting of performance cash units is accelerated at retirement. With respect to restricted stock unit awards, the benefit a retirement-eligible NEO would actually receive upon retirement would depend on whether the initial award is performance-based or time-based. For awards which are initially performance-based, but subject to vesting requirements, vesting accelerates upon retirement provided that the performance period is completed. For awards subject only to time-based vesting, the NEO forfeits any unvested restricted stock units upon retirement. Certain time-based awards fully vest upon retirement and attainment of age 60.
With respect to performance based awards a retirement-eligible NEO receives a prorated award, if the NEO retires at least six months into the performance period, provided that the objective performance goal is met. The 2008 performance-based restricted stock unit and performance cash unit awards were granted for a one-year performance period. Proration is based on the ratio of the number of days worked during the performance period to the total number of days in the performance period. In the case of the 2008 awards, as of the last day of our 2008 fiscal year, each NEO had completed the full one year performance period. The Committee met on February 16, 2009 and determined that our NEOs earned 25% of these 2008 awards. A NEO who retired during 2008 would receive a prorated payout based on this level of achievement.
A retirement-eligible NEO would receive accelerated vesting of all applicable unvested stock option awards upon retirement. Unvested stock options that are accelerated upon the retirement of a retirement-eligible NEO must be exercised within five years or the unexercised stock options will be cancelled.
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Death and Disability
Upon the death or disability of one of our NEOs, with respect to the accelerated vesting of unvested, or partially unvested, performance cash unit awards, performance-based restricted stock unit awards, and stock options, the same analysis applies under these two scenarios as would apply in the case of the retirement of a retirement-eligible NEO, as described immediately above.
Certain time-based restricted stock units which provide for full vesting and distribution upon retirement accelerate upon death or disability. Other time-based units are forfeited in the event of death or disability prior to vesting.
The following table shows the possible payouts to each of our NEOs for the specified type of employment termination. As detailed above, the values for the retirement portion of the table assume that our NEOs were retirement-eligible as of the last day of the 2008 fiscal year and also assume that our NEOs were eligible for the full vesting of any unvested restricted stock unit awards. As a result of these assumptions, the benefit conferred to our NEOs upon retirement is identical to the benefit conferred in the event of a disability. In addition, the amounts under Retirement and Disability Total in the table below are identical to the amounts under Death Total in the table below for each of the NEOs other than Mr. Periquito. In the event that Mr. Periquito dies, his designated beneficiaries would receive a life insurance benefit equal to 36 times his monthly base salary. This benefit is unique to Mr. Periquito and, thus, the incremental benefit paid out in the event of his death varies by the amount of this benefit from the payout in the event of his retirement or disability. The designated beneficiaries of our other NEOs would receive the same life insurance benefits generally available to all salaried employees and, thus, there is no additional incremental benefit paid out in the event that they die.
RESIGNATION | INVOLUNTARY TERMINATION |
RETIREMENT AND DISABILITY | DEATH | |||||||||||||||||||||||||||||||||||||||
Short- Term Incentives |
Long-Term Incentives | |||||||||||||||||||||||||||||||||||||||||
Name | With Cause ($) |
Without Cause (1) ($) |
2008 PEP ($) |
2006 Perfor- mance RSUs ($) |
2007 Perfor- mance RSUs ($) |
2008 Perfor- mance RSUs ($) |
2006 Perfor- mance Cash ($) |
2007 Perfor- mance Cash ($) |
2008 Perfor- mance Cash ($) |
Stock Options ($) |
RSUs ($) |
TOTAL ($) |
TOTAL (2) ($) |
|||||||||||||||||||||||||||||
Jeff M. Fettig | 0 | 0 | 570,919 | 420,000 | 2,008,783 | 1,323,200 | 436,780 | N/A | N/A | N/A | 0 | 570,919 | 4,759,682 | 4,759,682 | ||||||||||||||||||||||||||||
Roy W. Templin | 0 | 0 | 0 | 204,531 | 223,166 | 155,063 | 50,654 | 481,250 | 350,000 | 108,338 | 0 | N/A | 1,573,002 | 1,573,002 | ||||||||||||||||||||||||||||
Michael A. Todman | 0 | 0 | 1,973,263 | 188,333 | 461,590 | 277,045 | 111,149 | N/A | N/A | N/A | 0 | 1,973,263 | 3,011,380 | 3,011,380 | ||||||||||||||||||||||||||||
Paulo F. M. Periquito | 0 | 0 | 846,475 | 875,002 | 261,746 | 183,429 | 64,382 | 564,375 | 322,500 | 137,813 | 0 | N/A | 2,409,247 | 4,614,247 | ||||||||||||||||||||||||||||
Marc R. Bitzer | 0 | 0 | 1,894,037 | 144,032 | 175,572 | 132,361 | 41,970 | 466,177 | 338,035 | 90,020 | 0 | 1,894,037 | 3,282,204 | 3,282,204 |
(1) | Represents the benefit of accelerated vesting of certain unvested time-based restricted stock units for Messrs. Fettig, Todman, and Bitzer, and contractual severance payments for Mr. Periquito. |
(2) | For Mr. Periquito, represents the total benefit in the Retirement and Disability portion of the table and the added special life insurance benefit described above. All other NEOs receive the same life insurance benefits generally available to all salaried employees and, thus, no additional amounts are reflected in the table above. |
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Change in Control
Upon the occurrence of a change in control, our NEOs may receive accelerated vesting of previously unvested, performance cash units, restricted stock units, and stock options under the terms of those awards. Vesting of performance cash units and performance-based restricted stock units will accelerate upon a change in control, but awards will not be distributed unless they are not assumed by Whirlpools successor. Time-based restricted stock units will be accelerated and paid out upon a change in control.
We have agreements with each of the NEOs that take effect only in the event of a change in control. A change in control in accordance with these agreements is generally defined to include the acquisition by any person or group of 25% or more of Whirlpools voting securities, a change in the composition of the Board such that the existing Board or persons who were approved by a majority of directors or their successors on the existing Board no longer constitute a majority, and approval by the stockholders of an acquisition or liquidation of Whirlpool.
Under these change in control agreements, our NEOs may be entitled to receive an additional lump-sum payment in an amount sufficient to cover the full cost of any excise tax and the NEOs city, state, and federal income, employment, and excise taxes on payments under the change in control agreement and payments upon a change in control under compensation plans or award agreements, together with such iterative payments such that the NEO is made entirely whole for the impact of the excise tax. The excise tax gross-up represents a benefit actually paid out by Whirlpool in connection with the occurrence of a change in control, whereas the accelerated vesting of long-term incentives provides a benefit to our NEOs, but does not represent amounts that we pay out solely in the event of a change in control. The following table shows the possible payouts to our NEOs triggered solely upon the occurrence of a change in control as of December 31, 2008.
CHANGE IN CONTROL ONLY |
|||||||||||||||||||||||||||||||||
Long-Term Incentives | Excise Gross-Up |
TOTAL | |||||||||||||||||||||||||||||||
Name | Stock Options ($) |
2006 Perfor- mance RSUs ($) |
2007 Perfor- mance RSUs ($) |
2008 Perfor- mance RSUs ($) |
2006 Perfor- mance Cash ($) |
2007 Perfor- mance Cash ($) |
2008 Perfor- mance Cash ($) |
RSUs ($) |
Special Recognition RSUs ($) |
($) | ($) | ||||||||||||||||||||||
Jeff M. Fettig | 0 | 2,008,783 | 1,323,200 | 1,747,038 | N/A | N/A | N/A | 1,501,294 | 1,033,750 | | 7,614,065 | ||||||||||||||||||||||
Roy W. Templin | 0 | 223,166 | 155,063 | 202,615 | 481,250 | 350,000 | 433,350 | 1,033,750 | 620,250 | | 3,499,444 | ||||||||||||||||||||||
Michael A. Todman | 0 | 461,590 | 277,045 | 444,513 | N/A | N/A | N/A | 2,593,513 | 310,125 | | 4,086,786 | ||||||||||||||||||||||
Paulo F. M. Periquito | 0 | 261,746 | 183,429 | 257,569 | 564,375 | 322,500 | 551,250 | N/A | N/A | N/A | 2,140,869 | ||||||||||||||||||||||
Marc R. Bitzer | 0 | 175,572 | 132,361 | 167,840 | 466,177 | 338,035 | 360,081 | 2,307,537 | N/A | N/A | 3,947,603 |
Additional benefits are payable to our NEOs after a change in control, but only after a qualifying termination occurs. Qualifying terminations include: involuntary termination of the NEO by Whirlpool; voluntary termination by the NEO for good reason, as defined in the agreement; voluntary termination by the NEO during, and only during, the 13th month after the change in control; or a material breach of the change in control agreement by Whirlpool.
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Cash severance arising from these changes in control agreements is paid out in a lump sum payment equal to:
| the NEOs unpaid base salary; |
| vacation pay equal to twice the annual accrual rate appropriate for the NEO, based on the NEOs length of service with Whirlpool; |
| unreimbursed business expenses; |
| all other items earned by and owed to the NEO through and including the date of the termination; |
| the higher of three times the NEOs base salary on the date of the termination or the NEOs base salary at any time during the 12 months prior to the change in control; |
| the higher of three times current target bonus opportunity (in terms of a percentage of base salary) under PEP or the NEOs highest target bonus opportunity at any time during the 12 months prior to the change in control; and |
| the higher of the NEOs pro rata target bonus opportunity (in terms of a percentage of Base Salary) under PEP or the highest target bonus opportunity at any time during the 12 months prior to the change in control, or the actual bonus earned through the date of the termination under PEP based on the NEOs current level of goal achievement. |
The amount of cash severance will be offset by any other severance-type payments the NEO may be eligible or entitled to receive from any other sources.
Our NEOs are also entitled to receive continued benefits for 36 months in connection with a termination after a change in control. These benefits include certain health, life, and short- and long-term disability insurance benefits. The severance benefits provided to the NEOs in the event of a change in control include an amount, payable at the same time and in the same form as if paid from the non-qualified defined benefit pension plans, equal to the additional benefits to which the NEO would be entitled under our non-qualified defined benefit pension plans if:
| the NEOs benefits had fully vested; |
| the number of years of credited service was increased by three years; and |
| the NEOs age was equal to the NEOs actual age plus three years for purposes of determining retirement eligibility and early retirement reduction factors. |
The continuation of the NEOs benefits will be calculated at the same cost and at the same level of coverage as in effect on the date of termination.
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Mr. Periquitos change in control agreement differs slightly due to certain cost of living adjustments that are factored into his cash severance. In addition, Mr. Periquitos continued benefits differ from those benefits for other NEOs as described above and include: a designated automobile, special life insurance, and hospital, medical, dental, and pharmaceutical assistance.
The following table shows possible payouts to our NEOs as of December 31, 2008, triggered upon the occurrence of a change in control and a subsequent qualifying termination.
CHANGE IN CONTROL ONLY |
QUALIFYING TERMINATION AFTER CHANGE IN CONTROL | ||||||||||||||||||||
Cash Compensation | |||||||||||||||||||||
Name | TOTAL ($) | Severance Payments ($) |
Annual Incentives ($) |
Health, Welfare and Other Benefits ($) |
Enhanced Pension Benefits ($) |
Incremental Excise Tax Gross-Up ($) |
TOTAL ($) |
||||||||||||||
Jeff M. Fettig | 7,614,065 | 9,180,000 | 1,785,000 | 41,049 | 380,744 | 5,351,036 | 24,351,894 | ||||||||||||||
Roy W. Templin | 3,499,444 | 3,607,500 | 552,500 | 35,649 | 110,934 | 2,362,443 | 10,168,470 | ||||||||||||||
Michael A. Todman | 4,086,786 | 4,560,000 | 760,000 | 36,600 | 183,829 | | 9,627,215 | ||||||||||||||
Paulo F. M. Periquito | 2,140,869 | 4,710,000 | 735,000 | 312,231 | | N/A | 7,898,100 | ||||||||||||||
Marc R. Bitzer | 3,947,603 | 3,888,877 | 576,130 | 159,929 | | N/A | 8,572,539 |
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RELATED PERSON TRANSACTIONS |
Procedures for Evaluating Related Person Transactions
The Board has adopted written procedures relating to the Corporate Governance and Nominating Committees review and approval of transactions with related persons that are required to be disclosed in proxy statements by Securities and Exchange Commission regulations (related person transactions). A related person is defined under the applicable Securities and Exchange Commission regulation and includes our directors, executive officers, and owners of 5% or more of our common stock. The Corporate Secretary administers procedures adopted by the Board with respect to related person transactions and the Committee reviews and approves all such transactions. At times, it may be advisable to initiate a transaction before the Committee has evaluated it, or a transaction may begin before discovery of a related persons participation. In such instances, management consults with the Chairman of the Committee to determine the appropriate course of action. Approval of a related person transaction requires the affirmative vote of the majority of disinterested directors on the Committee. In approving any related person transaction, the Committee must determine that the transaction is fair and reasonable to Whirlpool. The Committee periodically reports on its activities to the Board. The written procedures relating to the Committees review and approval of related person transactions is available on our website: www.whirlpoolcorp.com scroll over the Leadership dropdown menu, then Board of Directors, then Corporate Governance Guidelines and Policies, then click on Procedures for Evaluating Related Person Transactions. All of the related person transactions described under the heading Related Person Transactions below have been approved by the Corporate Governance and Nominating Committee pursuant to these procedures.
Related Person Transactions
Harbor Shores Community Redevelopment Inc. (Harbor Shores) is a not-for-profit entity partially owned by three U.S. not-for-profit entities, including the Whirlpool Foundation. The purpose of the Harbor Shores project is to transform approximately 530 acres in Benton Harbor and St. Joseph, Michigan into a residential, recreational and commercial community with a goal of enhancing the economic base in southwest Michigan. Phase 1 of the project, which is expected to be completed in 2013, places a special emphasis on providing literacy and job training combined with employment options for low and moderate income residents. Since September 2005, Whirlpool Corporation has loaned $12 million to Harbor Shores, secured by a mortgage on real estate owned by Harbor Shores, and guaranteed up to an additional $28 million (as of December 31, 2008) borrowed by Harbor Shores from a third-party bank. The guarantee was made in the ordinary course, on substantially the same terms as those prevailing at the time for comparable guarantees with persons not related to the lender, and did not involve other unfavorable features. Certain current and former members of Whirlpool Corporation management serve as volunteer officers and trustees of Harbor Shores, including Whirlpools current CFO, who served as an officer and trustee of Harbor Shores until December 2008. None of these individuals has a personal financial interest in or otherwise receives compensation or benefits from Harbor Shores, Whirlpool Corporation, or the Whirlpool Foundation for their services to the Harbor Shores project.
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Whirlpool employs a son of Arnold Langbo, one of the directors of Whirlpool. Mr. Gary Langbo holds a management position in Whirlpools Marketing Department and received base salary and bonus compensation of $228,048 in 2008, along with other employment benefits that are standard for Whirlpool employees at that management level. Mr. Arnold Langbo was not involved in the recruiting or hiring of his son, nor in any decision affecting his sons compensation. His sons compensation was established by Whirlpool in accordance with our compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
No member of the Human Resources Committee was at any time during 2008 an officer or employee of Whirlpool and no member of the Committee has formerly been an officer of Whirlpool. In addition, no compensation committee interlocks existed during fiscal year 2008.
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EQUITY COMPENSATION PLAN INFORMATION |
The following table presents information as of December 31, 2008 with respect to Whirlpools compensation plans under which equity securities are authorized for issuance. The only plan reflected below that was not approved by our security holders is the Key Employee Treasury Stock Ownership Plan. This plan, the terms of which are substantially similar to our omnibus stock and incentive plans, was established to support the hiring and retention initiatives at key leadership positions by providing key leaders with the opportunity to receive Whirlpool common stock and stock options, restricted stock, and phantom stock awards to be paid from our treasury stock. In 2008, no awards were made under this plan.
Plan category | Number of securities to and rights |
Weighted-average and rights ($) |
Number of securities remaining available for future issuance under equity compensation plans(1) | |||||
Equity compensation plans approved by security holders |
5,244,234 | (2) | 87.81 | (3) | 2,208,245 | |||
Equity compensation plans not approved by security holders |
0 | 0 | 171,500 | |||||
Total |
5,244,234 | 87.81 | 2,379,745 |
(1) | Excluding securities in the Number of securities to be issued upon exercise of outstanding options, warrants and rights column. |
(2) | This amount includes 4,136,639 shares subject to outstanding stock options and 1,107,595 shares subject to outstanding restricted stock units. |
(3) | The weighted-average exercise price information does not include any outstanding restricted stock units. |
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Fees
In the years indicated, Ernst & Young LLP billed Whirlpool the following fees (in millions):
Year ended December 31 | ||||||
2007 | 2008 | |||||
Audit Fees |
$ | 10.7 | $ | 11.1 | ||
Audit Related Fees |
0.5 | 0.4 | ||||
Tax Fees |
4.4 | 3.3 | ||||
All Other Fees |
0.1 | 0.1 | ||||
Total |
$ | 15.7 | $ | 14.9 |
Audit-related fees are principally comprised of fees for services provided in connection with employee benefit plan audits and consultation with management as to the accounting or disclosure treatment of various transactions or events. Tax fees are principally comprised of fees for services provided in connection with worldwide tax planning and compliance services, expatriate tax services, and assistance with tax audits and appeals.
Advance Approval Policy for Independent Registered Public Accounting Firm Services
Pursuant to its written charter, the Audit Committee, or a subcommittee thereof comprised of one or more independent directors, is responsible for approving in advance all audit, internal control-related, and permitted non-audit services the independent registered public accounting firm performs for us. In recognition of this responsibility, the Audit Committee has established a policy to approve in advance all audit, internal control-related, and permissible non-audit services the independent registered public accounting firm provides. Prior to engagement of the independent registered public accounting firm for the next years audit, management or the independent registered public accounting firm submits to the Audit Committee a request for approval of services expected to be rendered during that year. This request outlines each of the four categories listed above, and the Audit Committee approves these services by category. The fees are budgeted and the Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original advance approval. In those instances, the Audit Committee requires specific approval in advance before engaging the independent registered public accounting firm. The Audit Committee may delegate authority to make advance approval to one or more of its members. The member or members to whom such authority is delegated must report, for information purposes only, any such approval decisions to the Audit Committee at its next scheduled meeting. A copy of the
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Audit Committee Pre-Approval Policy for Independent Registered Public Accounting Firm Services appears on Whirlpools website: www.whirlpoolcorp.com scroll over the Leadership dropdown menu, then Board of Directors, then Corporate Governance Guidelines and Policies, then click on Audit Committee Pre-Approval Policy.
AUDIT COMMITTEE REPORT |
The Audit Committee provides independent oversight of Whirlpools accounting functions and monitors the objectivity of the financial statements prepared under the direction of Whirlpools management. In addition, the Committee retains our independent registered public accounting firm; reviews major accounting policy changes by Whirlpool; reviews and approves the scope of the annual internal and independent audit processes; reviews and monitors our assessment of internal controls; approves in advance audit, permitted non-audit, and internal control-related services provided by the independent registered public accounting firm; approves all fees paid to the independent registered public accounting firm; and monitors our activities designed to assure compliance with Whirlpools ethical standards. The Committee is composed of five directors who have been determined by the Board to be independent and financially literate pursuant to the NYSE listing requirements. The Committee operates under a written charter adopted by our Board.
The Committee has reviewed our audited consolidated financial statements for 2008 with management, and management has represented to the Committee that these financial statements were prepared in accordance with accounting principles generally accepted in the United States. The Committee discussed with management the quality and the acceptability of the accounting principles employed, including all critical accounting policies used in the preparation of the financial statements and related notes, the reasonableness of judgments made, and the clarity of the disclosures included in the statements.
The Committee also reviewed our consolidated financial statements for 2008 with Ernst & Young LLP, our independent registered public accounting firm for 2008 (Ernst & Young), which is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States. Further, the Committee reviewed with Ernst & Young its judgment as to the quality, not just the acceptability, of Whirlpools accounting principles. In addition, the Committee met with Ernst & Young, with and without management present, to discuss the results of its examinations, its evaluations of our internal controls, and the overall quality of our financial reporting. The Audit Committee met eight times during the fiscal year ended December 31, 2008.
The Committee has received the written disclosures and the letter from Ernst & Young required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firms communications with the Audit Committee concerning independence, as modified or supplemented, and has discussed with Ernst & Young its independence. The Committee considered the compatibility of non-audit services Ernst & Young provided to us with Ernst & Youngs independence. Finally, the
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Committee discussed with Ernst & Young the matters required to be discussed by the Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board, and the Board has approved, the inclusion of the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2008 for filing with the Securities and Exchange Commission. The Committee has selected Ernst & Young as our independent registered public accounting firm for 2009.
AUDIT COMMITTEE
Mr. Michael D. White, Chair
Mr. Gary T. DiCamillo
Mr. William T. Kerr
Mr. Arnold G. Langbo
Mr. Miles L. Marsh
ITEM 2 RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS WHIRLPOOLS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
RESOLVED, that the appointment of Ernst & Young LLP to audit the Consolidated Financial Statements and related internal control over financial reporting of Whirlpool and its subsidiaries for fiscal 2009, made by the Audit Committee with the concurrence of the Board, is hereby ratified.
The Audit Committee has appointed, and the Board has concurred subject to your ratification, Ernst & Young LLP to audit and report on the Consolidated Financial Statements and related internal control over financial reporting of Whirlpool and its subsidiaries for fiscal 2009. Ernst & Young LLP served as Whirlpools independent registered public accounting firm for fiscal 2008.
Before making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates for the independent registered public accounting firm. For Ernst & Young LLP, this has included a review of its performance in prior years, its independence and processes for maintaining independence, the results of the most recent internal quality control review or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firms approach to resolving significant accounting and auditing matters including consultation with the firms national office, as well as its reputation for integrity and competence in the fields of accounting and auditing.
Representatives of Ernst & Young LLP will attend the annual meeting of stockholders and may make a statement if they wish. They will be available to answer appropriate questions at the annual meeting. To pass, this proposal requires the affirmative vote of a majority of the outstanding common stock present in person or by proxy at the annual meeting and entitled to
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vote. In the event that the selection of Ernst & Young LLP is not ratified by the stockholders, the Audit Committee will take that event into account in connection with any future decisions as to the selection of a firm to serve as Whirlpools independent registered public accounting firm, although by law the Audit Committee has final authority over the determination of whether to retain Ernst & Young LLP or another firm at any time.
The Board of Directors recommends that stockholders vote FOR Item 2, which ratifies the selection of Ernst & Young LLP as the independent registered public accounting firm for Whirlpool and its subsidiaries for fiscal 2009. |
ITEM 3 MANAGEMENTS PROPOSAL TO APPROVE THE WHIRLPOOL CORPORATION PERFORMANCE EXCELLENCE PLAN |
RESOLVED, that the Whirlpool Corporation Performance Excellence Plan, as amended, is hereby approved for an additional five years.
General Description
Whirlpools Performance Excellence Plan (the PEP Plan) is an annual bonus plan for regular employees that was first adopted in 1989. The Board and the stockholders renewed the PEP Plan in 1994, 1999 and 2004 in order for Whirlpool to continue to be eligible for tax deductions under Section 162(m) of the Internal Revenue Code, as amended (the Code). On February 17, 2009, the Board renewed the PEP Plan for an additional five years and made additional improvements, in each case subject to approval by the stockholders at this annual meeting. The PEP Plan, as amended, is consistent in substance with the PEP Plan last approved by the stockholders in 2004.
The Board believes that the PEP Plan strengthens the commitment of key management employees to create exceptional stockholder value by providing them with short-term incentive compensation based on our ability to meet financial and other business goals that create stockholder value. Because the PEP Plan allows the Human Resources Committee of the Board (the Committee) to retain the flexibility to choose appropriate business and financial goals and to change the target level of these goals each year, the tax regulations require that the PEP Plan be resubmitted to stockholders for approval every five years.
The affirmative vote of the holders of a majority of the shares of common stock present in person or by proxy at the annual meeting of stockholders and entitled to vote is necessary for approval of this Item 3. The PEP Plan will not be continued unless this vote is received.
The summary of the PEP Plan which follows is qualified in its entirety by reference to the complete text of the PEP Plan as set forth in Annex A to this proxy statement. You should read the complete text of the PEP Plan for more detail regarding the operation of the PEP Plan.
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Administration of the PEP Plan
The Committee is responsible for administration of the PEP Plan. The Committee consists solely of outside directors within the meaning of Section 162(m) of the Code and independent directors as defined under Section 303A of the Listed Company Manual of the New York Stock Exchange. Subject to the Committees approval, the Chief Executive Officer (the CEO) may assist in, and make recommendations regarding, the administration of the PEP Plan. The Senior Vice President, Global Human Resources will be responsible for the day-to-day administration of the PEP Plan following administrative guidelines approved from time to time by the Committee. The Committee may also delegate, to the CEO or the Senior Vice President, Global Human Resources, the authority to take actions with respect to individual awards to participants who are not Covered Employees pursuant to Code Section 162(m).
Eligibility and Participation
In general, any regular employee of Whirlpool is eligible to participate in the PEP Plan if recommended by the CEO. To participate in the PEP Plan, an employee must be recommended by the CEO and approved by the Committee. The Chairman and CEO are automatic participants in the PEP Plan. Last year, substantially all salaried employees in the United States, Canada, and Europe participated in the PEP Plan, as well as certain management personnel in other regions (approximately 11,000 employees in total).
Target Awards; Performance Goals
The Plan Year is Whirlpools fiscal year. At the beginning of each Plan Year, the Committee approves target awards and performance goals for PEP Plan participants. The Committee establishes target awards as a percentage of base salary, consistent with the intent to provide a competitive level of total cash compensation. Generally, performance is measured over the Plan Year. The performance period may be shorter for employees who become eligible after the first day of the Plan Year, provided that with respect to an employee who is or may be a Covered Employee under Code Section 162(m), the performance period and performance goals established must comply with the requirements of the regulations under Code Section 162(m).
The Committee establishes the performance goals as an objectively determinable level of attainment of any one or more of the following: Return on Equity; Return on Assets; Return on Net Assets; Net Earnings; Earnings Per Share; Free Cash Flow; Cash Flow; Revenue; Net Earnings; Depreciation and Amortization; Customer Satisfaction; Gross Margin; Market Share; Cost Reductions; Net Income Per Share; Net Income; Earnings Before Interest; Total Stockholder Return; Customer Growth; Revenue Growth; Sales; Economic Value Added; Pre-tax Profits; Operating Income; Taxes; Employee Satisfaction; Stock Price. Performance goals may be defined on a corporate or non-corporate basis as determined by the Committee.
The Committee determines which participants are or may be Covered Employees with respect to Code Section 162(m) at the beginning of the Plan Year. For each Covered Employee, the Committee establishes performance goals in writing, and an objective formula
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or method for determining the maximum award available to the Covered Employee. In no event may the maximum award exceed $5,000,000. Performance goals may not be changed during the Plan Year. If the performance goals are not met, the Covered Employees do not receive any payouts for that Plan Year. If the performance goals are met, the Committee may use negative discretion to determine the amount of the maximum award payable to the Covered Employee (the Final Award). The Committee may consider factors such as individual performance and corporate or non-corporate performance metrics in exercising negative discretion to determine the amount of the Final Award to Covered Employees.
Awards to participants who are not Covered Employees are based on the participants target award, corporate and/or non-corporate performance and individual performance if approved by the Committee. Once established, performance goals applicable to employees other than Covered Employees will not be changed during the Plan Year, but the CEO may recommend that the Committee approve adjustments due to external changes or unanticipated business conditions. Ordinarily, such participants will not receive any award if the performance goal is not met. However, in such circumstances, the CEO may recommend the payment of discretionary awards to participants who are not Covered Employees.
Payments, Deferrals, Terminations, and Beneficiaries
At the end of each Plan Year, the CEO will report the level of achievement of the applicable performance goals for participants to the Committee. The Committee will certify in writing the extent to which the performance goals have been satisfied and then approve payment of final awards. Payments under the PEP Plan will be made in a cash lump sum on March 14 of the calendar year following the Plan Year.
Payment of final awards may be delayed to a date after March 14 if Whirlpool reasonably anticipates that, if such payment was made as scheduled, Whirlpools deduction with respect to such payment to a Covered Employee would not be permitted due the applicability of Code Section 162(m), or such payment would violate other applicable laws. Payment of a final award may also be deferred by a participant who is eligible for and has elected to make deferrals of compensation pursuant to the terms of the Whirlpool Corporation Executive Deferred Compensation Plan II.
Upon termination of employment due to death, disability, retirement, reduction in force, or transfer to one of our affiliates, the Committee may approve a payout for a participant for the Plan Year. The payout for the terminated participant is generally calculated and paid in the same manner as described above; however, any payout payable to a terminated participant shall be modified to reflect the amount earned before such termination, as determined by the Committee. Except with respect to terminations for reasons described above or a termination in connection with a change in control of Whirlpool, if a participants employment is terminated, including voluntary and involuntary terminations of employment, (1) the Committee may payout all or part of a Covered Employee participants maximum award only if the performance goals are otherwise met at the completion of the Plan Year in which such termination of employment occurs, and (2) other participants generally shall not
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be entitled to a payout for such Plan Year absent a recommendation from the CEO and approval by the Committee. Participants may name a beneficiary or beneficiaries to whom any benefit under the PEP Plan is to be paid in case of their death.
Bonus Clawback
Any participant who would otherwise be eligible for an award pursuant to a completed Plan Year shall not be entitled to any payout under that award, and shall be required to repay Whirlpool for any previous payout of such award, if (1) the participant is terminated by or otherwise leaves employment with Whirlpool within two years following completion of the Plan Year and such termination of employment arises out, is due to, or is in any way connected with any misconduct or violation of Whirlpool policy, or (2) the participant becomes employed with a competitor within the two year period following termination, or for any other reason considered by the Committee in its sole discretion to be detrimental to Whirlpool or its interests.
Change in Control, Amendments, and Indemnification
If there is a change in control of Whirlpool (as defined in the Whirlpool Employees Pension Plan), a participant who is an employee as of the date of the change in control is entitled to an award for the Plan Year in which the change in control occurs, the amount of such award to be equal to the greater of an amount determined based upon (1) a formula using a specified percentage of the participants base salary and certain performance goals or (2) a specified percentage of the participants base salary. Such awards will be paid in cash as soon as administratively possible following the change in control and in any event within 30 days following the change in control. The PEP Plan may be amended by Whirlpool in its sole and absolute discretion and without notice, provided that no such amendment may reduce the rights of a participant to a payment or distribution or negatively affect a participants potential rights under the PEP Plan with respect to a change in control. The Plan provides for indemnification of members of the Committee or Board and participants for actions brought against such persons in connection with the PEP Plan.
New Plan Benefits
Because awards under the PEP Plan are based on performance during the year and are subject to the discretion of the Committee, the benefits and amounts that will be received or allocated in the future under the PEP Plan are not determinable.
At its meeting on February 16, 2009, the Committee granted, subject to the approval of the PEP Plan by the stockholders, awards to each of Whirlpools current named executive officers and certain other participants, that will be earned only if Whirlpool achieves a return on equity performance goal and that are intended to qualify as performance-based compensation for purposes of Code Section 162(m). If this Item 3 is not approved, the awards will not be valid and the Committee will consider what course of action to follow with respect to the awards and future grants of performance-based awards.
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The following table sets forth the target and maximum awards which were established under the PEP Plan for fiscal year 2009 for the named executive officers, all current executive officers as a group, all non-executive directors as a group, and all non-executive officer employees as a group. All of these awards are subject to the approval of the PEP Plan by the stockholders at this annual meeting.
Target and Maximum Awards Under the Performance Excellence Plan (2009 Plan Year)
Name and Position |
Target | Maximum | |||||
Jeff M. Fettig Chairman and Chief Executive Officer |
$ | 1,785,000 | $ | 5,000,000 | |||
Michael A. Todman President, Whirlpool North America |
$ | 760,000 | $ | 3,040,000 | |||
Roy W. Templin Executive Vice President and Chief Financial Officer |
$ | 552,500 | $ | 2,210,000 | |||
Paulo F. M. Periquito President, Whirlpool International |
$ | 735,000 | $ | 2,940,000 | |||
Marc R. Bitzer Executive Vice President, Whirlpool Europe |
$ | 552,000 | $ | 2,210,000 | |||
Executive Officers as a Group |
$ | 4,385,000 | $ | 15,400,000 | |||
Non-Executive Directors as a Group |
$ | 0 | $ | 0 | |||
Employees other than Executive Officers as a Group |
$ | 145,615,000 | $ | 308,704,000 | (1) |
(1) | Assumes maximum company performance factor of 200%, and a weighted average individual performance factor of 106% based on performance rating distribution guidelines. |
Board Recommendation
The Board believes that approving the PEP Plan will enable Whirlpool to continue to qualify PEP Plan payments for deduction under federal tax laws while continuing appropriate short-term compensation incentives.
The Committee strongly believes that purely numeric formula incentive plans are inadequate to drive the superior results that Whirlpool seeks to achieve. Removing Committee discretion from incentive compensation severely limits the Committees ability to carry out its corporate governance responsibilities. Good judgment and discretion are the essence of what stockholders expect from Board members. As noted earlier, the Committee believes that the discretion it has been afforded under existing incentive plans for management employees at all levels has played a critical role in the creation of efficient incentive structures in recent years.
The Board of Directors recommends a vote FOR approval of Item 3, which revises and renews the Whirlpool Corporation Performance Excellence Plan for an additional five years. |
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ITEM 4 MANAGEMENTS PROPOSAL TO APPROVE AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION TO DECLASSIFY OUR BOARD OF DIRECTORS |
RESOLVED, that, subject to stockholder approval, Whirlpools Restated Certificate of Incorporation (the Certificate) be amended and restated to provide for the annual election of all Directors beginning at the 2010 Annual Meeting of Stockholders, provided however, that prior to the 2010 Annual Meeting of Stockholders, any Director elected by the stockholders of Whirlpool to a three-year term may complete the term to which he or she has been elected, and such other conforming and technical changes to the Certificate as may be necessary or appropriate.
General Description
Article FIFTH of our Certificate currently provides that our Board be divided into three classes of approximately equal size, composed of directors each serving terms of office of three years. In January 2009, the Board voted to approve, and to recommend to our stockholders that they approve, this proposal, which amends and restates our Certificate to phase out the classification of the Board, to provide instead for the annual election of all directors, and to make certain conforming and technical changes to the Certificate as necessary or appropriate. If this proposal is approved by our stockholders, those directors previously elected for three-year terms of office by our stockholders will complete their three-year terms, and would be eligible for re-election thereafter for one-year terms at each Annual Meeting of Stockholders. Beginning with the Annual Meeting in 2012, the declassification of the Board would be complete and all directors would be subject to annual election to one-year terms.
Delaware law provides that members of a board that is classified may be removed only for cause. At present, because our Board is classified, the Certificate provides that our directors are removable only for cause. If this Item 4 is approved by the stockholders, Article FIFTH(b) of the Certificate would be amended to provide that each director elected by the stockholders on or after the Annual Meeting in 2010 may be removed with or without cause.
The affirmative vote of at least 80% of the voting power of our outstanding common stock is necessary for approval of Item 4. Unless such vote is received, the present classification of the Board will continue.
The proposed amendments to the Certificate as a result of Item 4 is substantially in the form of Annex B, with additions indicated by underlining and deletions indicated by strike-outs. The general description above is subject to the actual text reflected in Annex B. If Item 4 is approved by Whirlpools stockholders, the Board will also make conforming and technical changes to Whirlpools By-laws as may be necessary or appropriate to phase out the classification of the Board. In addition, if the Certificate is amended as a result of the stockholders approving Item 4 (or Items 5 or 6 discussed below), we will amend Article SECOND to refer to our current registered agent in the State of Delaware Corporation Service Company.
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In deciding to recommend declassification of the Board, the Board considered the arguments in favor of and against continuation of the classified Board, listened to stockholder views concerning this matter, and determined that providing for the annual election of directors in order to maintain and enhance the accountability of our Board to our stockholders outweighed the legitimate benefits of a classified board.
The Board of Directors recommends a vote FOR approval of Item 4, which revises the Restated Certificate of Incorporation to provide for the annual election of Directors. |
ITEMS 5 AND 6 MANAGEMENTS PROPOSAL TO APPROVE AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE SUPERMAJORITY VOTE PROVISIONS |
RESOLVED, that, subject to stockholder approval, Whirlpools Restated Certificate of Incorporation (the Certificate) be amended and restated to provide for the elimination of the supermajority vote provisions from the following three Articles and make any other conforming or technical changes to the Certificate as may be necessary or appropriate:
| Article SIXTH, which requires the affirmative vote of at least 80% of the voting power of the outstanding common stock to approve a business combination between Whirlpool and a substantial stockholder (10% holder or affiliate) and certain other significant transactions unless the transaction is approved by the continuing directors or satisfies the fair price requirements; |
| Article EIGHTH, Section (a), which requires that any action of the stockholders to adopt, amend, alter or repeal any provision of Whirlpools By-laws (the By-laws) shall require the affirmative vote of at least 80% of the voting power of the outstanding common stock; and |
| Article TENTH, which requires the affirmative vote of at least 80% of the voting power of the outstanding common stock to amend, alter, repeal or adopt any provision inconsistent with certain provisions of the Certificate. |
General Description
The Board, in its continuing review of corporate governance matters, has determined to remove all of the supermajority vote requirements from the Certificate and By-laws. In deciding to recommend the elimination of supermajority vote provisions, the Board considered the arguments in favor of and against continuation of supermajority vote provisions, gave careful consideration to stockholder views concerning this matter, and determined that eliminating the supermajority vote provisions in order to enhance the accountability of our Board to our stockholders outweighed the legitimate benefits of such provisions. To effect these changes, the Board has adopted the above resolution.
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Item 5 seeks stockholder approval of the repeal of Article SIXTH in its entirety. Item 5, as a result of being approved by the Board, requires the affirmative vote of at least a majority of the voting power of our outstanding common stock (rather than 80%). Unless such vote is received, the supermajority provisions in Article SIXTH will remain unchanged.
Item 6 seeks stockholder approval of the elimination of the supermajority vote requirements of Article EIGHTH and Article TENTH. To pass, Item 6 requires the affirmative vote of at least 80% of the voting power of the outstanding common stock. Unless such vote is received, the supermajority provisions in Article EIGHTH and Article TENTH will remain unchanged.
The proposed amendments to the Certificate as a result of Items 5 and 6 are substantially in the form of Annex C and Annex D, respectively, with additions indicated by underlining and deletions indicated by strike-outs. The general description of the provisions herein is subject to the actual text reflected in Annex C and Annex D. Subject to the approval of Items 5 and/or 6 by Whirlpools stockholders, the Board will also make conforming and technical changes to the By-laws to eliminate supermajority vote provisions therein. In addition, if the Certificate is amended as a result of the stockholders approving either Item 5 or Item 6 (or Item 4 discussed above), we will amend Article SECOND to refer to our current registered agent in the State of Delaware Corporation Service Company.
Current Supermajority Vote Requirements and the Proposed Amendments
Item 5
Article SIXTH Business Combination Transaction. Article SIXTH of the Certificate provides that the affirmative vote of at least 80% of the voting power of the outstanding common stock is required to approve certain transactions with a Substantial Stockholder unless (1) such transaction is approved by a majority of the Continuing Directors; or (2) certain fair price requirements are met. Further, Article SIXTH contains a provision stipulating that Article SIXTH may only be amended, altered or repealed by stockholders by the affirmative vote of at least 80% of the voting power of the outstanding common stock, unless approved by a majority of the Continuing Directors.
The Certificate defines a Substantial Stockholder generally as any person (or any affiliate or assignee thereof) who is, or was at any time within the two-year period immediately prior to the date in question, the beneficial owner of 10% or more of the outstanding voting power of common stock. A Continuing Director is defined generally as a director who is not a Substantial Stockholder or affiliate, associate or employee of a Substantial Stockholder and was a member of the Board prior to the time the Substantial Stockholder became a Substantial Stockholder, including any successor of a Continuing Director who is recommended or elected by a majority of Continuing Directors then on the Board.
Fair price provisions are designed to help boards defend against coercive two-tiered tender offers. In this type of takeover, a potential acquirer will offer one price for the shares needed to gain control of a target company and then offer a lower price or other less favorable
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consideration for the remaining shares, thereby creating pressure for stockholders to tender their shares for the tender offer price, regardless of its value. Standard fair price provisions require that, absent board or stockholder approval, the potential acquirer must pay a fair price for all shares as determined under a specified formulation.
The proposed amendment would repeal Article SIXTH of the Certificate in its entirety. If Article SIXTH is repealed, then under the Delaware General Corporation Law the affirmative vote of only a majority of the voting power of the outstanding common stock would be required to approve certain transactions, subject to the following exceptions as prescribed by the Delaware General Corporation Law. If the transaction constitutes a business combination within the meaning of Section 203 of the Delaware General Corporation Law involving a person owning 15% or more of a companys voting stock (referred to as the Interested Stockholder), then the transaction could not be completed for a period of three years after the time the person became an Interested Stockholder unless (1) Whirlpools Board of Directors approved either the business combination or the transaction that resulted in the person becoming an Interested Stockholder prior to such person becoming an Interested Stockholder, (2) upon consummation of the transaction that resulted in the person becoming an Interested Stockholder, that person owned at least 85% of Whirlpools outstanding voting stock (excluding shares owned by persons who are directors and officers of Whirlpool and shares owned by certain employee benefit plans of Whirlpool), or (3) the business combination was approved by Whirlpools Board of Directors and by the affirmative vote of at least 66-2/3% of Whirlpools outstanding voting stock not owned by the Interested Stockholder.
Item 6
Article EIGHTH, Section (a) Amendment of By-laws. Article EIGHTH of the Certificate requires the affirmative vote of at least 80% of the voting power of the outstanding common stock of Whirlpool to amend, alter, change, adopt or repeal any provision of Whirlpools By-laws. The proposed amendment would eliminate the supermajority vote requirement in its entirety from this Section.
Article TENTH Amendment of Certificate of Incorporation. Under Article TENTH of the Certificate, Whirlpool reserves the right to amend, alter, change or repeal any provision contained in the Certificate in the manner prescribed by Delaware General Corporation Law, provided, however, the affirmative vote of at least 80% of the voting power of the outstanding common stock is required to amend, alter, repeal or adopt any provision inconsistent with Article FIFTH (classified Board of Directors), Article EIGHTH (amendment of By-laws), and Article TENTH (amendment of certain provisions of the Certificate).
The proposed amendment would eliminate the supermajority vote provisions of Article EIGHTH and Article TENTH. If the supermajority vote provision of Article TENTH is eliminated, then under the Delaware General Corporation Law the affirmative vote of only a majority of the voting power of the outstanding common stock, rather than 80%, would be necessary to approve any amendment or alteration to the Certificate once the Board approved and recommended the amendment.
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The Board of Directors recommends a vote FOR approval of Items 5 and 6, which revise the Restated Certificate of Incorporation to eliminate the supermajority vote provisions. |
ITEMS 7 AND 8 STOCKHOLDER PROPOSALS |
Item 7 Stockholder Proposal Relating to the Annual Election of Directors
We have been advised that the following non-binding stockholder proposal will be presented at the annual meeting. The proposal will be voted on at the annual meeting if the proponent (who owns 95 shares of our common stock, as of October 2008), or a qualified representative, is present at the meeting and submits the proposal for a vote. Following the stockholder proposal is our statement in opposition. We will provide to stockholders the name and address of the proponent upon receiving an oral or written request.
For the reasons set forth below in our Boards statement in opposition to the stockholder proposal, our Board of Directors recommends a vote AGAINST Item 7.
The text of the shareholder proposal and supporting statement appear below as received by us and Whirlpool assumes no responsibility for its content or accuracy.
Resolution Proposed by Stockholder
RESOLVED, shareowners ask that our Company take the steps necessary to reorganize the Board of Directors into one class with each director subject to election each year and to complete this transition within one-year.
Stockholders Supporting Statement
Our current practice, in which only a few directors stand for election annually, is not in the best interest of our Company and its stockholders. Eliminating this staggered system would require each director to stand for election annually and would give stockholders an opportunity to register their view on the performance of each director annually. Electing directors in this manner is one of the best methods available to stockholders to ensure that the Company will be managed in a manner that is in the best interest of stockholders.
Arthur Levitt, Chairman of the Securities and Exchange Commission, 1993-2001 said: In my view its best for the investor if the entire board is elected once a year. Without annual election of each director shareholders have far less control over who represents them. Source: Take on the Street by Arthur Levitt.
Some companies express the unfounded concern that the annual election of each director could leave a company without experienced directors in the event that all incumbents are voted out by stockholders. In the unlikely event that stockholders would vote to replace all directors, such a decision would express an overwhelming dissatisfaction with the incumbent directors and would reflect the need for change.
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This proposal topic won our impressive 86% support (based on yes and no votes) at our 2008 annual meeting. The Council of Institutional Investors www.cii.org recommends timely adoption of shareholder proposals upon receiving their first 51% or higher vote.
The Council of Institutional Investors also recommends adoption of annual election of each director. This proposal topic also won strong support at the following companies in 2008:
Fortune Brands (FO) |
74 | % | Nick Rossi (Sponsor) | ||
McGraw-Hill (MHP) |
70 | % | Nick Rossi | ||
Eastman Chemical (EMN) |
58 | % | Ray T. Chevedden |
The merits of this Elect Each Director Annually proposal should be considered in the context of the need to initiate improvements in our companys corporate governance and in individual director performance. For instance in 2008 The Corporate Library www.thecorporatelibrary.com, an independent investment research firm said:
We are downgrading our rating on Whirlpool Corporation to C from B due to concerns about board composition and executive pay. Four directors are long-tenured (Miles Marsh, Paul Stern, Janice Stoney and Allan Gilmour) and two directors are one year from being long-tenured (Kathleen Hempel and Arnold Langbo). Long-tenured directors form a majority on the audit, corporate governance & nominating and finance committees and create the perception of an entrenched board. This raises concerns about board independence.
The above concerns shows there is need for improvement. Please encourage our board to respond positively to this proposal:
Elect Each Director Annually
Yes on 7
Whirlpools Board of Directors Statement OPPOSING This Proposal
The Board of Directors has adopted a resolution which provides for the annual election of directors, and submitted such resolution to the stockholders at this annual meeting. Subject to stockholder approval of Item 4 at this annual meeting, the Board of Directors will amend Whirlpools Certificate of Incorporation and By-laws to commence declassification of the Board of Directors. Notwithstanding the Boards willingness to begin to implement such declassification, the proponent of Item 7 has refused to voluntarily withdraw this proposal which merely requests that the Board take substantially the same action that it has already taken. Consequently, the Board recommends that stockholders vote AGAINST this proposal.
The Board of Directors recommends a vote AGAINST the stockholder proposal advocating the election of all Whirlpool directors annually appearing at Item 7 on the accompanying proxy or voting instruction card. |
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Item 8 Stockholder Proposal Relating to the Adoption of Simple Majority Vote
We have been advised that the following non-binding stockholder proposal will be presented at the annual meeting. The proposal will be voted on at the annual meeting if the proponent (who owns 24 shares of our common stock, as of October 2008), or a qualified representative, is present at the meeting and submits the proposal for a vote. Following the stockholder proposal is our statement in opposition. We will provide to stockholders the name and address of the proponent upon receiving an oral or written request.
For the reasons set forth below in our Boards statement in opposition to the stockholder proposal, our Board of Directors recommends a vote AGAINST Item 8.
The text of the shareholder proposal and supporting statement appear below as received by us and Whirlpool assumes no responsibility for its content or accuracy.
Resolution Proposed by Stockholder.
RESOLVED, Shareholders request that our board take the steps necessary so that each shareholder voting requirement in our charter and bylaws, that calls for a greater than simple majority vote, be changed to a majority of the votes case for and against related proposals in compliance with applicable laws. This proposal applies to each 80% shareholder supermajority vote provision in our charter and bylaws.
Stockholders Supporting Statement.
Currently a 1%-minority can frustrate the will of our 79%-shareholder majority. Also our supermajority vote requirements can be almost impossible to obtain when one considers abstentions and broker non-votes. Supermajority requirements are arguable most often used to block initiatives supported by most shareowners but opposed by management.
The Council of Institutional Investors www.cii.org recommends adoption of simple majority voting. The Council also recommends timely adoption of shareholder proposal upon receiving their first 51% or higher vote. This proposal topic won up to 89% support at the following companies in 2008 including 79% at Whirlpool:
Eli Lilly (LLY) |
64% | |
Lowes (LOW) |
70% | |
McGraw-Hill (MHP) |
74% | |
Amgen (AMGN) |
79% | |
FirstEnergy (FE) |
79% | |
Whirlpool (WHR) |
79% | |
Lear Corp. (LEA) |
88% | |
Liz Claiborne (LIZ) |
89% |
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The merits of this Simple Majority Vote proposal should also be considered in the context of the need to initiate improvements in our companys corporate governance and in individual director performance. For instance in 2008 the following governance and performance issues were identified:
| We had no shareholder right to: |
Cumulative voting.
Act by written consent.
Call a special meeting.
An independent Chairman.
| Plus there was no replacement for our retired Lead Director. |
| Our directors also served on boards rated D by the Corporate Library: |
Arnold Langbo |
Johnson & Johnson (JNJ) | |
Arnold Langbo |
Hershey (HSY) | |
Michael Johnston |
Flowserve (FLS) | |
Michael White |
PepsiCo (PEP) |
| Arnold Langbo also chaired the JNJ executive pay committee and JNJ was rated Very High Concern on executive pay by The Corporate Library. |
Additionally:
| William Kerr, who served on our Audit Committee, was potentially overextended with a total of 5 board seats, including Meredith Corporation (MDP) rated D by The Corporate Library. At Meredith founder Katherine Meredith controlled 63% of the company. This meant that Ms. Merediths economic interest was not aligned with its voting interest in the company and thus there was an increased risk that minority shareholders could have their interests subordinated by the interests of the Meredith family. As of June 30, 2008 the Meredith total annual shareholder return was minus 52% compared to minus 13% for the S&P 500. Source: The Corporate Library. |
| Furthermore William Kerr was the Chairman of Meredith Corporation. |
| These four directors each had 14 to 21 years Whirlpool director tenure Independence concern and succession planning concern: |
Kathleen Hempel |
Arnold Langbo |
Janice Stoney |
Miles Marsh |
Paul Stern |
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The above concerns shows there is need for improvement. Please encourage our board to respond positively to this proposal:
Adopt Simple Majority Vote
Yes on 8
Whirlpools Board of Directors Statement OPPOSING This Proposal
The Board of Directors has adopted a resolution to eliminate supermajority vote provisions from Whirlpools Certificate of Incorporation and By-laws, and submitted such resolution to the stockholders at this annual meeting. Subject to stockholder approval of Items 5 and 6 at this annual meeting, the Board of Directors will amend Whirlpools Certificate of Incorporation and By-laws to eliminate supermajority vote provisions therein. Notwithstanding the Boards willingness to begin to eliminate all such supermajority vote requirements, the proponent of Item 8 has refused to voluntarily withdraw this proposal which requests that the Board take substantially the same action that it has already taken. Consequently, the Board recommends that stockholders vote AGAINST this proposal.
The Board of Directors recommends a vote AGAINST the stockholder proposal advocating the elimination of Whirlpools supermajority stockholder vote requirements appearing at Item 8 on the accompanying proxy or voting instruction card.
|
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WHIRLPOOL CORPORATION
PERFORMANCE EXCELLENCE PLAN
ARTICLE 1
GENERAL
1.1 ESTABLISHMENT OF THE PLAN:
Whirlpool Corporation, a Delaware corporation, hereby adopts this Plan, which shall be known as the WHIRLPOOL CORPORATION PERFORMANCE EXCELLENCE PLAN (the Plan).
1.2 PURPOSE:
The purpose of the Plan is to attract and retain the best possible employee talent and to motivate employees to focus attention on shareholder value, drive performance in support of this goal and other business goals, and reward company and individual performance.
1.3 ADMINISTRATION:
(a) The Committee (as defined in Section 2.1) shall administer the Plan. Subject to the Committees approval, the Chief Executive Officer of the Company may assist in, and make recommendations regarding, the administration of the Plan. The Senior Vice President Global Human Resources will be responsible for the day-to-day administration of the Plan following administrative guidelines approved from time-to-time by the Committee.
(b) Subject to the limitations of the Plan, the Committee shall, based on recommendations by the Chief Executive Officer: (i) select from the Employees of the Company, those who shall participate in the Plan; (ii) make awards in such forms and amounts as it shall determine; (iii) impose such limitations, restrictions, and conditions upon such awards as it shall deem appropriate; (iv) interpret the Plan and adopt, amend, and rescind administrative guidelines and other rules and regulations relating to the Plan; (v) correct any defect or omission or reconcile any inconsistency in the Plan or in any award granted hereunder; and (vi) make all other necessary determinations and take all other actions necessary or advisable for the implementation and administration of the Plan. The Committees determinations on matters within its authority shall be conclusive and binding upon the Company and all other persons.
(c) All expenses associated with the Plan shall be borne by the Company subject to such allocation to its subsidiaries and operating units as it deems appropriate.
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ARTICLE II
DEFINITIONS
2.1 DEFINITIONS:
Whenever used herein, the following terms shall have the meaning set forth below, unless otherwise expressly provided. Certain terms which only apply to Article VI are defined in Article VI.
(a) Base Salary shall mean, as determined by the Committee, the regular salary actually paid during a Plan Year to a Participant or a Participants regular salary determined as of a particular date during the applicable Plan Year selected by the Committee. Regular salary shall include any salary reduction contributions made to the Companys 401(k) plan or other deferred compensation plans, but shall be exclusive of any awards under this Plan and of any other bonuses, incentive pay or special awards.
(b) Board shall mean the Board of Directors of Whirlpool Corporation.
(c) Chairman means the chairman of the Board.
(d) Code means the Internal Revenue Code of 1986, as amended.
(e) Committee shall mean the Human Resources Committee of the Board or such other Committee as is designated by the Board, which shall consist solely of two or more members of the Board who are outside directors as required by and within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code). The Board shall appoint the members of the Committee and fill any vacancy on the Committee.
(f) Company shall mean Whirlpool Corporation and its Subsidiaries.
(g) Corporate shall mean relating to Whirlpool Corporation.
(h) Covered Employee shall mean an employee who the Committee determines is or is potentially a covered employee with respect to any Plan Year for purposes of Code Section 162(m).
(i) Covered Employee Performance Goal shall mean a level of attainment of a specified Covered Employee Performance Measure which can be objectively determined in accordance with Section 162(m) of the Code.
(j) Covered Employee Performance Measures shall mean any of the following performance criteria, either alone or in any combination: Return on Equity; Return on Assets; Return on Net Assets; Net Earnings; Earnings Per Share; Free Cash Flow; Cash Flow; Revenue; Net Earnings; Depreciation and Amortization; Customer Satisfaction; Gross Margin; Market Share; Cost Reductions; Net Income Per Share; Net Income; Earnings Before Interest; Total Stockholder Return; Customer Growth; Revenue Growth; Sales; Economic
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Value Added; Pre-tax Profits; Operating Income; Taxes; Employee Satisfaction; Stock Price. Covered Employee Performance Measures shall be calculated so as to exclude the effects of extraordinary, unusual or non-recurring items and changes in applicable laws, regulations or accounting principles. Covered Employee Performance Measures may be defined on a Corporate or Noncorporate basis as determined by the Committee.
(k) Employee shall mean a regular employee of the Company who is in a position of meeting the defined eligibility criteria for participation in the Plan, as stated in Section 3.1.
(l) Executive Officers shall mean the Chief Executive Officer, the President, and any Executive or Senior Vice President designated by the Committee.
(m) Final Award shall mean the award actually paid to a Participant pursuant to Section 4.2.
(n) Individual Performance Factor shall mean the factor associated with the performance rating assigned to an Employee as part of the Performance Management Process or other method(s) of adjustments intended to recognize individual performance.
(o) Maximum Award shall mean the award amount available to be paid to a Covered Employee Participant pursuant to Section 4.1 provided that the Committee has certified in writing that the applicable Covered Employee Performance Goal(s) have been met.
(p) Noncorporate shall mean a specified segment of the Companys operations designated as such by the Chief Executive Officer and approved by the Committee for purposes of the Plan, such as a business unit, division, product line, or other such segmentation.
(q) Other Participant shall mean an Employee who is not a Covered Employee who is approved by the Committee for participation in the Plan for a specified Plan Year.
(r) Participant shall mean an Other Participant or a Covered Employee who is approved by the Committee for participation in the Plan for a specified Plan Year.
(s) Performance Management Process shall mean the Companys process for managing individual performance.
(t) Plan Year shall mean the Companys fiscal year.
(u) Results Factor shall mean the factor determined by the Committee to reflect the level of attainment of applicable Corporate or Noncorporate objectives.
(v) Target Award shall mean the award to be paid to a Participant for meeting planned performance results.
(w) Target Award Percentage shall mean the percentage of Base Salary determined by the Committee to reflect an appropriate incentive for each Participant based on the Participants responsibilities, opportunity and authority to affect overall financial results.
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2.2 GENDER AND NUMBER:
Except when otherwise indicated by the context, words in the masculine gender, when used in the Plan, shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY AND PARTICIPATION:
Eligibility for participation in the Plan shall be limited to Employees of the Company. Except with respect to the Chairman and the Chief Executive Officer, the Chief Executive Officer shall recommend Employees for participation in the Plan subject to the approval of the Committee. The Chairman and the Chief Executive Officer shall automatically participate in the Plan.
3.2 PARTIAL PLAN YEAR PARTICIPATION:
(a) Covered Employee Participants. A Covered Employee who becomes eligible after the beginning of a Plan Year may participate in the Plan for that Plan Year on terms and conditions determined by the Committee, it being understood that if a Covered Employee becomes eligible more than 90 days after the beginning of the Plan Year, the Committee may either use the established Covered Employee Performance Goals for the Covered Employee Participant based on performance during the remainder of the Plan Year or establish different Covered Employee Performance Goals and/or a different performance period for such Covered Employee Participant provided such Covered Employee Performance Goals and/or performance period satisfy the requirements of Treasury Regulation Section 1.162-27(e)(2).
(b) Other Participants. An Employee who is not a Covered Employee who becomes eligible after the beginning of a Plan Year may participate in the Plan for that Plan Year on terms and conditions determined by the Committee. Such situations may include, but are not limited to (i) new hires, (ii) when an Employee is promoted from a position that did not meet the eligibility criteria to a position that does meet applicable eligibility criteria, or (iii) when an Employee is transferred from an affiliate that does not participate in the Plan to an affiliate that does participate in the Plan.
ARTICLE IV
INDIVIDUAL AWARDS
4.1 COMPONENTS OF INDIVIDUAL AWARDS; TARGET AWARD PERCENTAGES; PERFORMANCE GOALS:
(a) Covered Employee Participants. With respect to Covered Employee Participants, within 90 days after the start of the Plan Year, or such other date as may be required in order to meet the applicable deadline for the establishment of performance goals permitting compensation payable under the Plan with respect to such year to qualify as qualified
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performance-based compensation under Treasury Regulation Section 1.162-27(e), the Committee shall select the Covered Employee Participants for the Plan Year, establish in writing the Covered Employee Performance Goal(s) applicable to each Covered Employee Participant based on one or more Covered Employee Performance Measures, and determine an objective formula or method for determining the Maximum Award available to each Covered Employee Participant if the Performance Goals are met. Except with respect to the Chairman and the Chief Executive Officer, the Chief Executive Officer shall recommend, subject to the approval of the Committee, the Maximum Award for each Covered Employee Participant. After the end of each Plan Year, the Committee shall certify in writing whether the Covered Employee Performance Goal(s) has been met. If the Covered Employee Performance Goal(s) have been met, the Committee shall determine the amount of the Maximum Award payable to each Covered Employee Participant pursuant to the terms of the Plan. In no event shall any Maximum Award exceed $5,000,000.
(b) Other Participants.
(i) Individual awards for Other Participants shall be based on (i) the Other Participants Target Award and (ii) Corporate and/or Noncorporate performance. In addition, individual performance will be a component of individual awards if approved by the Committee. For each Plan Year, the Chief Executive Officer shall recommend for Other Participants, subject to the approval of the Committee, the Target Award Percentages and performance goals for that Plan Year. Target Award Percentages shall reflect the Participants job responsibilities and opportunity and authority to affect overall financial results. An Other Participant whose Target Award is changed during the Plan Year shall receive a Final Award based on the amount of Base Salary actually earned while in each Target Award category during the Plan Year.
(ii) Performance for Other Participants shall be measured based on Corporate and/or Noncorporate (if appropriate) results and, if authorized by the Committee, individual performance. If authorized by the Committee, individual performance goals shall be set during the Companys Performance Management Process. The Chief Executive Officer shall recommend, subject to the approval of the Committee, the process for measuring Corporate and Noncorporate performance. Such recommendation shall include:
(1) Organizational level of performance measurement, e.g., Corporate, business unit, division, product line, or another level, either singly or in combination;
(2) Specific measures of performance for each organizational level; and
(3) Specific performance goals for each organizational level.
For each Plan year, the Chief Executive Officer shall recommend, subject to the approval of the Committee, a range of performance goals for Corporate and/or Noncorporate results and the Individual Performance Factors. Each performance range and the range of
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Individual Performance Factors shall include a level of performance at which 100% of the Target Award shall be earned. In addition, each range shall include levels of performance above and below the 100% performance level.
(iii) For Other Participants at the Corporate level, performance shall, unless otherwise determined by the Committee, be measured on overall Company results. For all other Other Participants, performance shall, unless otherwise determined by the Committee, be measured on Corporate and/or applicable Noncorporate results as authorized by the Committee. The performance measures to be used for Other Participants shall be chosen from among the Covered Employee Performance Measures or any other operational, financial or other performance metric selected by the Committee. Performance measures need not be the same within the Company. The Committee, in its sole discretion, may select among the performance measures from Plan Year to Plan Year.
(iv) Once established, performance goals applicable to Other Participants normally shall not be changed during the Plan Year. However, if the Chief Executive Officer determines that external changes or other unanticipated business conditions have materially affected the fairness of the goals, then the Chief Executive Officer may recommend and the Committee may approve appropriate adjustments to the performance goals applicable to Other Participants (either up or down) during the Plan Year.
(v) Normally, Other Participants shall not receive any payout when the applicable performance goals are not achieved. If the applicable performance goals are not achieved, the Chief Executive Officer may recommend, subject to the approval of the Committee, payment of awards on a discretionary basis to Other Participants. Further, the Chief Executive Officer may recommend, subject to the approval of the Committee, an adjustment of the performance goals applicable to Other Participants in the event of a Plan Year consisting of less than 12 months.
(vi) Individual performance shall be reflected in the Final Award based on the performance rating assigned to an Other Participant as part of the Performance Management Process if the Committee establishes individual performance as part of the performance criteria for an award.
4.2 FINAL AWARD DETERMINATIONS:
(a) Covered Employee Participants. The Committee may establish a formula to determine the Final Award to be payable to the Covered Employee Participant provided that the Covered Employee Performance Goals are met, which formula may, but is not required to, consist of Base Salary multiplied by Individual Performance factor multiplied by Results Factor multiplied by Target Award Percentage. In determining a Covered Employee Participants Final Award, the Committee shall have the sole and absolute discretion to reduce (including a reduction to zero) the amount of the Maximum Award. The Committees exercise of negative discretion to reduce the Maximum Award of one Covered Employee Participant
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shall not have the effect of increasing the Final Award payable to any other Covered Employee Participant. For the sake of clarity, in no event shall a Covered Employee Participants Final Award exceed the Covered Employee Participants Maximum Award.
(b) Other Participants. At the end of each Plan Year, Final Awards shall be computed for each Other Participant. The Committee retains the discretion to decrease or eliminate the amount of the Final Award otherwise payable to an Other Participant.
(c) All Participants. Participants must be actively employed by the Company on the last day of the Plan Year to receive an award for that Plan Year, except as provided in Sections 6.1, 6.2, and 7.1.
4.3 DELEGATION OF AUTHORITY:
The Committee may, in its discretion, delegate to the Chief Executive Officer and/or the Vice President Global Human Resources, the authority to take any actions with respect to individual awards for Other Participants that may be taken by the Committee pursuant to the Plan.
ARTICLE V
PAYMENT OF FINAL AWARDS
5.1 TIMING AND FORM OF PAYMENT:
(a) At the end of each Plan Year, the Chief Executive Officer shall report the level of achievement of the applicable performance goals for Participants to the Committee. Prior to any payment hereunder, the Committee shall certify in writing the extent to which the Covered Employee Performance Measures for Covered Employee Participants and performance measures for Other Participants have been satisfied and approve the payment of Final Awards. With respect to Covered Employee Participants only, the Committee may not waive the achievement of the applicable Covered Employee Participant Goals, except upon the occurrence of an event as specified in Section 7.1 and to the extent specified therein.
(b) Payments of Final Awards to Participants shall be made in cash in a lump sum on March 14th of the calendar year following the applicable Plan Year, provided no Participant shall be entitled to damages with respect to Final Awards paid after March 14th of any calendar year.
(c) Payment of Final Awards may be delayed to a date after the designated payment date specified in Section 5.1(b) under the circumstances described in this Section 5.1(c), provided the Company treats all payments to similarly situated Participants on a reasonably consistent basis.
(i) Payments Subject to Code Section 162(m). A payment to a Covered Employee Participant may be delayed to the extent the Company reasonably anticipates that if the payment were made as scheduled, the Companys deduction with
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respect to such payment would not be permitted due to the applicability of Code Section 162(m), provided that the payment is made either during the Covered Employee Participants first taxable year in which the Company reasonably anticipates, or should reasonably anticipate, that if the payment is made during such year, the deduction of such payment will not be barred by the applicability of Code Section 162(m) or during the period beginning with the date of the Covered Employee Participants separation from service (within the meaning of Code Section 409A) and ending on the later of the last day of the taxable year of the Company in which the Covered Employee Participant separates from service or the 15th day of the third month following the Covered Participants separation from service, and provided further that all scheduled payments to that Covered Employee Participant that could be delayed in accordance with Treasury Regulation Section 1.409A-2(b)(7)(i) are also delayed. Where the payment is delayed to a date on or after the Covered Employee Participants separation from service, the payment will be considered a payment upon a separation from service for purposes of the rules under Treasury Regulation Section 1.409A-3(i)(2) (payments to specified employees upon a separation from service) and, in the case of a specified employee (within the meaning of Code Section 409A), the date that is six months after the Covered Employee Participants separation from service is substituted for any reference to the Participants separation from service in the first sentence of this Section 5.1(c)(i). No election may be provided to the Covered Employee Participant with respect to the timing of payment under this Section 5.1(c)(i).
(ii) Payments that would Violate Federal Securities Laws or Other Applicable Law. A payment may be delayed where the Company reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law; provided that the payment is made at the earliest date at which the Company reasonably anticipates that the making of the payment will not cause such violation. For this purpose, the making of a payment that would cause inclusion in gross income or the application of any penalty provision or other provision of the Code is not treated as a violation of applicable law.
(iii) Other Events and Conditions. The Company may delay a payment upon such other events and conditions as the Commissioner may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.
5.2 DEFERRAL OF PAYMENTS:
Notwithstanding the provisions of Section 5.1 describing the form and timing of payment of Final Awards granted pursuant to the Plan, a Participant who is eligible for and has elected to make deferrals of compensation under the terms of the Whirlpool Corporation Executive Deferred Compensation Plan II may defer payment of all or part of a Final Award granted pursuant to the Plan provided that the time and form of the election to defer and the payment of any portion of the Final Award so deferred shall be governed by the terms of the Whirlpool Corporation Executive Deferred Compensation Plan II.
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5.3 APPLICATION OF CODE SECTION 409A:
Notwithstanding anything in this Plan to the contrary, if it is determined that any payment hereunder constitutes nonqualified deferred compensation that would be paid upon the separation from service of a specified employee (as such terms are defined in Code Section 409A), then any such payment that otherwise would have been paid within six months after the Participants separation from service shall be accrued, without interest, and its payment delayed until the first day of the seventh month following the Participants separation from service, or if earlier, the Participants death, at which point the accrued amount will be paid as a single, lump sum cash payment.
ARTICLE VI
TERMINATION OF EMPLOYMENT
6.1 COVERED EMPLOYEE PARTICIPANTS:
(a) If a Covered Employee Participants employment is terminated by reason of death, or Disability during the Plan Year, the Committee may approve a Final Award for the Covered Employee Participant for the Plan Year. The Final Award shall be paid in accordance with Article V.
(b) Except for terminations listed in Section 6.1(a) or in connection with a termination due to a Change in Control as defined in Section 7.1, in the event a Covered Employee Participants employment is terminated for any other reason including voluntary and involuntary termination, the Committee may award all or part of such Covered Employee Participants Maximum Award, if the Covered Employee Performance Goal(s) with respect to such award are otherwise met at the completion of the Plan Year in which such termination of employment occurred.
6.2 OTHER PARTICIPANTS:
(a) If an Other Participants employment is terminated by reason of death, Disability (as defined in the Whirlpool Employees Pension Plan), retirement, reduction-in-force, or an Other Participant is transferred to an affiliate that does not participate in the Plan, the Other Participants Final Award shall be based on (i) the Other Participants actual Base Salary paid through the date of termination, (ii) the Other Participants Target Award Percentage, (iii) Corporate/Noncorporate performance as measured at the end of the Plan Year, and (iv) if authorized by the Committee, individual performance as determined under the Performance Management Process. The Final Award shall be paid in accordance with Article V.
(b) Retirement shall mean a Participants termination of employment after his or her Early Retirement Age or Normal Retirement Age as set forth in the Part II Supplement to the Whirlpool Employees Pension Plan for the Salaried Employees Participating Group. Reduction-in-force shall have the meaning as defined in the Whirlpool Corporation Personnel Policy Manual.
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(c) Except for terminations listed in Section 6.2(a) or a termination due to a Change in Control as defined in Section 7.1, in the event an Other Participants employment is terminated for any other reason including voluntary and involuntary termination, the Other Participant shall not be entitled to an award for the Plan Year in which the termination occurs. However, the Chief Executive Officer may recommend and the Committee approve an award for the Plan Year in which an Other Participants termination occurs.
6.3 BONUS CLAWBACK:
Any Participant who would otherwise be eligible for an award pursuant to a completed Plan Year shall not be entitled to any payment under that award, and shall be required to repay the Company any payment of such award, if (i) the Participant is terminated by or otherwise leaves employment with the Company within two years following completion of the Plan Year and such termination of employment arises out, is due to, or is in any way connected with any misconduct or violation of Company policy, (ii) the Participant becomes employed with a competitor within the two year period following termination, or for any other reason considered by the Committee in its sole discretion to be detrimental to the Company or its interests.
ARTICLE VII
CHANGE IN CONTROL
7.1 CHANGE IN CONTROL:
(a) In the event of a Change in Control of Whirlpool Corporation, as defined below, a Participant who is an Employee as of the date of the Change in Control shall be entitled to, for the Plan Year in which the Change in Control occurs, the greater of:
(1) An award to be the Final Award determined using:
(A) | The Participants actual Base Salary rate in effect on the date of the Change in Control; |
(B) | The Participants Target Award Percentage; |
(C) | Actual Corporate and Noncorporate (if applicable) performance results to the date of the Change in Control; and |
(D) | The greater of the Participants Individual Performance Factor (if applicable) or 1.0; |
or
(2) The Participants Target Award Percentage times his actual Base Salary rate in effect on the date of the Change in Control.
(b) The Committee as constituted immediately prior to the Change in Control shall determine how actual Corporate and Noncorporate performance should be measured for
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purposes of determining the Results Factor in the Final Award calculation in Section 7.1(a). The Committees determination shall be conclusive and final.
(c) Final Awards shall be paid in cash to the Participant as soon as administratively possible but no later than 30 days following a Change in Control.
7.2 DEFINITION OF CHANGE IN CONTROL:
A Change in Control shall be defined as set forth in the Whirlpool Employees Pension Plan, as amended, provided that to the extent any payment under Section 7.1 is a payment of deferred compensation subject to Section 409A of the Code, such payment shall only occur if the event giving rise to the change in control would also constitute a change in control event within the meaning of Section 409A of the Code.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 NONTRANSFERABILITY:
No right or interest of any Participant in this Plan shall be assignable or transferable, or subject to any lien, directly, by operation of law or otherwise, including execution, levy, garnishment, attachment, pledge, and bankruptcy.
8.2 TAX WITHHOLDING:
The Company shall have the right to deduct from all payments under this Plan any foreign, federal, state, or local taxes required by law to be withheld with respect to such payments.
8.3 AMENDMENTS:
The Company, in its absolute discretion, without notice, at any time and from time to time, may modify or amend, in whole or in part, any or all of the provisions of this Plan, or suspend or terminate it entirely; provided, that no such modification, amendment, suspension, or termination may reduce the rights of a Participant (or his beneficiary as the case may be) to a payment or distribution in accordance with the provisions contained in this Plan or change to the detriment of a Participant any potential rights in that Plan Year created pursuant to Article IV of this Plan. For the avoidance of doubt, the Committees exercise of negative discretion pursuant to Section 4.2 shall not be deemed to be an amendment to the Plan.
8.4 INDEMNIFICATION:
Each person who is or shall have been a member of the Committee or the Board or who is or shall have been an Employee of the Company shall be indemnified and held harmless by the Company. This indemnification and hold harmless provision shall be against and from any loss, cost, liability, or expense, including, without limitation, fees and expenses
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of legal counsel, that may have been imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan. In addition, this indemnification and hold harmless provision shall be against and from any and all amounts paid by him in settlement thereof with the Companys approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. This indemnification and hold harmless right shall not be exclusive of any other rights of indemnification that the person may be entitled under the Companys Certificate of Incorporation or By-laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify him or hold him harmless.
8.5 BENEFICIARY DESIGNATION:
(a) Each Participant under the Plan may name, from time to time, any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his death before he receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during his lifetime. In the absence of any such designation, or if the designated beneficiary is no longer living, benefits shall be paid to the surviving member(s) of the following classes of beneficiaries, with preference for classes in the order listed below:
(1) | Participants spouse (unless the parties were divorced or legally separated by court decree); |
(2) | Participants children (including children by adoption); |
(3) | Participants parents (including parents by adoption); or |
(4) | Participants executor or administrator. |
(b) Payment of benefits, in accordance with Section 6.1(a) or Section 6.2(a), shall be made exclusively to the member(s) of the first class, in the order listed above, which has surviving member(s). If that class has more than one member, benefit payments shall be made in equal shares among members of that class.
8.6 RIGHTS OF PARTICIPANTS:
Nothing in this Plan shall interfere with or limit in any way the right of the Company to terminate or change a Participants employment at any time; nor does the Plan confer upon any Participant any right to continue as an employee of the Company for any period of time or to continue his present or any other rate of compensation. No Participant in a previous Plan Year, or other Employee at any time, shall have a right to be selected for participation in a current or future Plan Year.
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8.7 GOVERNING LAW:
The Plan shall be construed in accordance with and governed by the laws of the State of Michigan.
8.8 SHAREHOLDER APPROVAL AND COMMITTEE CONTINGENCIES; PAYMENT OF AWARDS:
Payment of any awards under this Plan shall be contingent upon the affirmative vote of the shareholders of at least a majority of the votes cast (including abstentions) approving the Plan. Unless and until such shareholder approval is obtained, no award shall be paid or payable pursuant to this Plan. To the extent necessary for purposes of Code Section 162(m), this Plan shall be resubmitted to shareholders for their re-approval with respect to awards payable for the taxable years of the Company commencing on and after the five year anniversary of initial shareholder approval.
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WHIRLPOOL CORPORATION
PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO DECLASSIFY OUR BOARD OF DIRECTORS (ITEM 4)
The text below is the portion of Whirlpools Restated Certificate of Incorporation proposed to be amended by Item 4. Proposed additions are indicated by underlining and proposed deletions are indicated by strike-outs.
FIFTH : (a) Subject to the rights of holders of Preferred Stock, the number of directors of the Corporation shall be determined from time to time by, or in the manner provided in, the By-laws of the
Corporation. Subject to the rights of holders of Preferred Stock, the directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall be as nearly equal in number as possible.
AtCommencing at the annual meeting of stockholders to bethat is held in 1986, Class Icalendar year 2010 (the 2010 Annual Meeting), directors shall be
elected annually for a one-year term, Class II directors shall be elected for a two-year term, and Class III directors shall be elected for a three-year term. At each succeeding annual meeting of stockholders beginning in 1987,
the successors to directors whose terms expire at such meeting shall be of the same class and shall be elected to hold office for three-year terms. A director shall hold office until the annual meeting of stockholders for the year in which such
directors term expires and until such directors successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement or removal from
office. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of
directors shorten the term of any incumbent director.terms of one year, except that any director in office at the 2010 Annual Meeting whose term expires at the annual meeting of stockholders held in calendar year 2011 or calendar year
2012 (a Continuing Classified Director) shall continue to hold office until the end of the term for which such director was elected and until such directors successor shall have been elected and qualified. Accordingly, at the 2010
Annual Meeting, the successors of the directors whose terms expire at that meeting shall be elected for a term expiring at the annual meeting of stockholders that is held in calendar year 2011 and until such directors successors shall have
been elected and qualified. At the annual meeting of stockholders that is held in calendar year 2011, the successors of the directors whose terms expire at that meeting shall be elected for a term expiring at the annual meeting of stockholders that
is held in calendar year 2012 and until such directors successors shall have been elected and qualified. At each annual meeting of stockholders thereafter, all directors shall be elected for terms expiring at the next annual meeting of
stockholders and until such directors successors shall have been elected and qualified. Any vacancy in the Board of Directors or newly created directorship resulting from any increase in the number of directors may be filled by a
majority of the directors then in office, excluding any directors who shall theretofore have resigned effective as of a future date, although less than a quorum.
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(b) Directors elected prior to the 2010 Annual Meeting and any director appointed to fill a vacancy of any director elected prior to the 2010 Annual Meeting, may be removed from office only for cause. Any other director may be removed from office with or without cause.
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WHIRLPOOL CORPORATION
PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE SUPERMAJORITY VOTE PROVISIONS (ITEM 5)
The text below is the portion of Whirlpools Restated Certificate of Incorporation proposed to be amended by Item 5. Proposed additions are indicated by underlining and proposed deletions are indicated by strike-outs.
SIXTH: (a)(1) In addition to any affirmative vote required by law or under any other provision of this Certificate of Incorporation, the terms of any class or series of Preferred Stock, the terms of any other
securities of the Corporation, or otherwise, and except as otherwise expressly provided in this Article Sixth:
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shall require the affirmative vote of (i) the holders of at least 80%, of the voting power
of the then outstanding Voting Stock (as hereinafter defined) and (ii) the holders of at least a majority of the voting power of the then outstanding Voting Stock other than Voting Stock of which the Substantial Stockholder in question is a
Beneficial Owner. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or under any other provision of this Certificate of Incorporation, the terms of
any class or series of Preferred Stock, the terms of any other securities of the Corporation, or any agreement with any national securities exchange, or otherwise.
(2) The term Business Combination as used in this Article Sixth
shall mean any transaction which is described in any one or more of clauses (A) through (E) of Paragraph (a)(1) of this Article Sixth.
(b) The provisions of this Article Sixth shall not be applicable to any Business Combination if:
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(c) For the purpose of this Article Sixth:
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provided, however, that no employee benefit or similar plan of the Corporation or any Subsidiary of the Corporation, nor any trustee or other person with respect
thereto, nor any Affiliate or Associate of any such trustee or other person, solely by reason of the capacity as trustee or by reason of acting on behalf of such plan or on behalf of the participants in such plan with respect thereto, shall be
deemed, for any purposes hereof, to be a Beneficial Owner of any Voting Stock held under any such plan.
(4) For purposes
of computing the percentage of Voting Stock of which a person is a Beneficial owner in order to determine whether the person is a Substantial Stockholder, the outstanding Voting Stock shall include all shares deemed owned by such person through
application of subparagraph (3) of this Paragraph (c) but shall not include any other shares of treasury stock or Voting Stock which may be issuable by the Corporation pursuant to any agreement, or upon the exercise of conversion rights,
warrants or options, or otherwise.
(5) Continuing
Director shall mean a person who is unaffiliated with the Substantial Stockholder and (i) who was elected or appointed as a director by the stockholders or the board of directors of the Corporation prior
to the date as of which the Substantial Stockholder in question became a Substantial Stockholder, or (ii) who was designated (before being initially elected or appointed as a director) as a Continuing Director, and whose designation as such has
been Duly Approved.
(6) Any matter shall be Duly
Approved if, in addition to any other approval or vote required by law or under any other provision of this Certificate of Incorporation, the terms of any class or series of Preferred Stock, the terms of any
other securities of the Corporation, or otherwise, it is approved by the vote of at least a majority of the Continuing Directors, except, if the votes of such Continuing Directors in favor of such matter would be insufficient to constitute an act of
the Board of Directors (if a vote by the Board of Directors were to have
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been taken), then such terms shall mean an action approved by the unanimous vote of the Continuing Directors (but not less than three Continuing
Directors).
(7) Affiliate or
Associate shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on February 18, 1986.
(8) A
Subsidiary of any person shall mean any corporation of which a majority of any class of Equity Security is owned, directly or indirectly, by such person; provided,
however, that for the purposes of the definition of Substantial Stockholder set forth in subparagraph (2), and the proviso to the definition of Beneficial Owner set forth in subparagraph (3), of this Paragraph (c), the term
Subsidiary shall mean only a corporation of which a majority of each class of Equity Security is owned, directly or indirectly, by the Corporation.
(9) Voting Stock shall mean any shares of capital stock of the
Corporation entitled to vote generally in the election of directors.
(10) Equity
Security shall have the meaning given to such term under Rule 3a-11 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on February 18, 1986.
(11) Fair Market Value shall mean, with respect to any
securities, property, assets or other consideration, the fair market value thereof at any time prior to the date of the consummation of any transaction, which value and time shall be determined by a majority of the Continuing Directors who may, if
they wish, be advised on such value by an investment banking firm selected by them. The fees and expenses of any such investment banking firm shall be paid by the Corporation.
(12) In the event of any Business Combination in which the Corporation survives, the phrase consideration
other than cash to be received as used in Paragraph (b) (2) (A) of this Article Sixth shall include the shares of Common Stock and/or the shares of any other class or series of outstanding
capital stock of the Corporation retained by the holders of such shares.
(d) A majority of the Continuing Directors shall have the power
to determine for the purposes of this Article Sixth, on the basis of information known to them, all facts necessary to determine compliance with this Article Sixth, including but not limited to (i) whether a person is a Substantial Stockholder,
(ii) the number of shares of Voting Stock of which any person is a Beneficial Owner, (iii) whether the requirements of Paragraph (b) of this Article Sixth have been met with respect to any Business Combination, (iv) whether a
person is an Affiliate or Associate of another, (v) whether the assets subject to any Business Combination have an aggregate Fair Market Value of $10,000,000 or more, or (vi) any other factual matter relating to the applicability or effect
of this Article Sixth.
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(e) Any determinations made by any Continuing Directors pursuant to this Article Sixth in good faith and on the
basis of such information and assistance as was then reasonably available for such purpose shall be conclusive and binding upon the Corporation and its stockholders including any Substantial Stockholder.
(f) Nothing contained in this Article Sixth shall be construed to relieve any Substantial Stockholder from any fiduciary obligation imposed by law.
(g) Any amendment, alteration or repeal of this Article Sixth shall, in addition to any other vote or approval required by law or under any other
provision of this Certificate of Incorporation, the terms of any class or series of Preferred Stock, the terms of any other securities of the Corporation, or otherwise, require the affirmative vote of the holders of (i) at
least 80%, of each class or series of outstanding stock of the Corporation entitled to vote thereon and (ii) at least a majority of the voting power of the then outstanding Voting Stock other than Voting Stock of which a Substantial Stockholder
is a Beneficial Owner; provided, however, that neither such vote is required for any amendment, alteration or repeal which is Duly Approved and submitted to the stockholders for their consideration.
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WHIRLPOOL CORPORATION
PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE SUPERMAJORITY VOTE PROVISIONS (ITEM 6)